Gold price rises as focus turns to Biden administration

Marco Green
January 21, 2021

Gold prices rose on Wednesday as expectations for a massive USA stimulus to help the world's largest economy recover from the coronavirus jolt bolstered bullion's appeal as an inflation hedge and pressured the dollar.

Spot gold rose 1.5% to $1,867.06 per ounce by 11:58 a.m. EST (1658 GMT), having touched an over one-week high earlier.

Japan's Nikkei 225 futures added 0.07%, but Hong Kong's Hang Seng index futures lost 0.29%.

"With more rounds of fiscal stimulus expected under the Joe Biden administration, further championed by Yellen's call to "act big", such measures could well pump up USA inflationary pressures while boosting gold prices in tandem", said FXTM market analyst Han Tan.

The Treasury Secretary nominee, Janet Yellen advised the U.S lawmakers in acting fast on COVID-19 support packages during her Senate confirmation hearing held yesterday.

USA treasuries fell after Yellen said during her hearing that 2017 tax cuts for corporations should be rolled back.

Gold can still reach $2,000, probably by the middle of the second quarter when a good amount of people get inoculated and there's so much cash in the system with demand nearly coming back to normal, said Howie Lee, an economist at OCBC Bank.

Lower Treasury yields reduce the opportunity cost of holding non-yielding bullion. Biden outlined a $1.9 trillion coronavirus relief package, saying bold investment was needed to jump-start the economy and accelerate the distribution of vaccines to bring the coronavirus under control.

Bullion is considered a hedge against inflation and currency debasement that can result from widespread stimulus.

Silver rose 2% to $25.68 an ounce, platinum climbed 2.2% to $1,107.05, while palladium rose 1.5% to $2,387.14. West Texas Intermediate futures rallied by 0.79% to trade at $53.40 a barrel, building on a 1.2% rise seen at the last trading session.

Other reports by Click Lancashire

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