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Gold futures added to gains on Wednesday after a sharp rally in the session prior, with bullion buoyed by seasonal buying trends that have momentarily overshadowed a perkier U.S. dollar and loftier government bond yields, dealers said.
Bullish buyers make the case that physical gold tends to be bought during the holiday period between November and December which is helping to buck up prices in recent trade.
Renewed talk of more U.S. fiscal relief to fight the economic harm from COVID-19, may also be bullish for gold, analysts said.
“Also buoying marketplace sentiment are renewed talks among U.S. congressional leaders on a financial stimulus package for Americans,” wrote Jim Wyckoff, analyst at Kitco.com
A bipartisan group of lawmakers have laid out a $908 billion plan, but some disappointment was seen later in the session after Senate Majority Leader Mitch McConnell, R-Ky., called for a $500 billion package and called for more “targeted relief” measures, according to news reports.
See: Endgame afoot on Capitol Hill as lawmakers mull fiscal stimulus, funding, defense bills
February gold GCG21, -0.08% was trading $7.30, or 0.4%, higher at $1,826.10 an ounce, after the commodity surged 2.1% on Tuesday and marked its biggest one-day climb in three weeks. Prices on Monday had touched their lowest settlement since July 1.
Gold prices briefly gained some altitude, adding slightly to the day’s move after a reading from Automatic Data Processing showed a rise of 307,000 U.S. private-sector jobs in November, below forecast for 420,000 jobs, according to economists average estimates surveyed by Econoday.
Tuesday’s moves came as the U.S. dollar sank to its lowest level in about three years.
“The bullion price has rebounded in the last few hours on the back of a combination of market drivers. Firstly, the weakening of the US dollar is lifting up the price as investors are betting on further declines for the greenback, which is proving a supportive element for gold and other assets priced in dollars,” wrote Carlo Alberto De Casa, chief analyst at ActivTrades, in a Wednesday note.
However, the dollar was trading flat on Wednesday, at 91.348, as measured by the ICE U.S. Dollar Index DXY. A softer dollar can make gold which is priced in dollars more attractive to buyers using other monetary units.
Commodity traders also are paying attention to government bond yields, which have been rising, because they can undercut appetite for gold and other precious metals that don’t offer a coupon.
The 10-year Treasury note TMUBMUSD10Y, 0.931% yielded 0.93% on Wednesday, holding steady after a sizable pop on Tuesday. Yields rise as bond prices fall.
Meanwhile, March silver SIH21, -1.16% rose a penny, or less than 0.1%, at $24.09 an ounce, after jumping 6.6% in the prior session.
