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Gold rose to an over one-week high on Wednesday on a soft dollar, while signs of progress in discussions over a new U.S. coronavirus relief package bolstered bullion’s appeal as a hedge against possible inflation.
Top Senate Republican Mitch McConnell urged the U.S. Congress to pass a $1.4 trillion spending bill including coronavirus stimulus, while some senators and House members proposed relief measures worth $908 billion.
Spot gold rose 0.9% to $1,830.40 per ounce by 1038 GMT, having earlier hit $1,832.20, its highest since Nov. 24.
U.S. gold futures gained 0.8% to $1,833.60.
“There’s a risk that you could get a little bit of inflation… There is a good possibility we will retest $1,835- $1,836 level,” said Michael Hewson, chief market analyst at CMC Markets UK.
However, more positive vaccine news could push more money out of gold and into riskier assets, Hewson added.
Making bullion cheaper for holders of other currencies, the dollar steadied off a low since April 2018.
Near-zero interest rates and unprecedented stimulus to revive the global economy have driven gold about 20% higher so far in 2020, since the non-yielding asset is considered a hedge against likely inflation and currency debasement.
Gold, however, marked its worst monthly performance in four years in November hit by optimism over vaccine-led economic recovery.
Britain became the first country in the world on Wednesday to approve Pfizer-BioNTech’s vaccine.
2021 will be a mixed year for gold, positive in the first half and negative in the second, said UBS analyst Giovanni Staunovo.
“Essentially it’s driven by the vaccine use influencing central bank activity … I’m not saying there will be a rate cut, but there’ll be some discussion about a change in the policy environment and gold will start to feel the pain (in the second half),” he said.
Elsewhere, silver gained 1% to $24.24 per ounce. Platinum rose 0.7% to $1,006.48 and palladium was up 0.6% to $2,421.19.