Gold price jumps on US stimulus hopes
Gold prices advanced and stood firm past the $1,900 mark on Thursday, boosted by an easing dollar and increased investor confidence that there will be further US fiscal stimulus measures to aid the economy.
Spot gold jumped 1.1% to $1,907.89 per ounce by 12:20 p.m. EDT, having ended September 4.3% lower — its biggest monthly decline since November 2016. US gold futures were 1.0% higher, trading at $1,914.50 per ounce in New York.
The surge in gold prices comes after US Treasury Secretary Steven Mnuchin said Wednesday’s discussions with House Speaker Nancy Pelosi had “made a lot of progress” on the long-awaited covid-19 relief legislation, elevating expectations that a stimulus deal may be reached.
StoneX analyst Rhona O’Connell told Reuters uncertainty over the outcome of the US presidential election will remain a supportive factor for bullion in the longer term, but negotiations over stimulus between Pelosi and Mnuchin are “likely to influence trade more in the short term.”
Regardless of the election outcome, “there will still likely be wrangling over fiscal stimulus to try and maintain financial stability … I think there will be decently sized stimulus anyway, but the political nuances will stay,” she added.
“There’s nowhere to put your money that you will get a decent yield on. The money that’s sloshing (from the stimulus) around in the system will find its way into gold,” David Govett, CEO of Govett Precious Metals and a former trader, said.
“I think it’s going to get worse before it gets better and because of that gold is going to benefit and move back to $2,000.”
