Spot gold fluctuated in Asian trading on Thursday, trying to make up ground after plummeting close to the 1890 mark and returning to around $1,900 as markets continued to focus on THE U.S. stimulus package.
Steven Mnuchin, the US Treasury secretary, said that despite partial progress in talks between Republicans and Democrats on a new rescue package, the two sides remained far apart and that reaching a comprehensive deal before next month’s presidential election would be difficult.
Mr. Mnuchin spoke by phone with House Speaker Nancy Pelosi (D., Calif.) for another hour on Wednesday morning, and later said during a discussion that the two parties remain divided in negotiations over a new bailout package and still haven’t agreed on a cap on funding. At $1.8tn, the White House is still short of the $2.2tn that Democrats approved in the House of Representatives earlier this month.
Gold futures closed higher yesterday, recovering most of the losses suffered the previous day after the price fell below the psychologically important $1,900 level.
Jeff Wright, executive vice President of GoldMining, said gold recovered some of its recent losses “due to the decline in the dollar and expectations of no stimulus ahead of the U.S. election.”
The dollar continued to weaken in spite of better-than-expected US producer price data. PPI rose 0.4% last month
The dollar’s weakness has provided support for dollar-denominated gold. The ICE Dollar index fell 0.2 percent in Wednesday trading.
Comments from Richard Clarida, vice-chairman of the Federal Reserve, also weighed on the dollar.
Gold futures for December delivery rose $12.70, or 0.7%, to close at $1,907.30 an ounce after dropping 1.8% on Tuesday.
Every time gold prices fall, there will be investors who move in and buy who think gold is still a great hedge against risk, said Harshal Barot, senior research adviser at Metals Focus. With the epidemic in the US showing no signs of slowing down and the new City stimulus in the US making no progress, gold is stuck in the $1850-1940 / oz zone.
“For gold, we’re just waiting for a clear catalyst,” said James Hatzigiannis, chief market strategist at Ploutus Capital Advisors. And, of course, the dollar and any new developments in the stimulus negotiations are having the biggest impact on prices right now.”
Gold bulls also point to uncertainty over the 2020 US presidential election and uncertainty over the outlook for economic growth during the virus outbreak as factors underpinning gold prices, despite a sharp cyclical fall.
Wright said he thought “gold will be in a range until next month, still waiting for the election results.”
A Democratic victory, he said, could “drive up the gold price and trigger a panic in the stock market”.