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Gold Near 2-Week High on Biden Stimulus Push, Commodities Rally

CommoditiesJan 20, 2021 03:21PM ET
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By Barani Krishnan

Investing.com - Gold prices hit near two-week highs on Wednesday on stimulus plans anticipated from the Joe Biden administration and a broad commodities rally spurred by the inauguration of the 46th U.S. president.

Money also flowed into the yellow metal and other haven portfolios as the dollar stalled for a third straight day, unable to advance after a rally over the past two weeks with few breaks that propelled the Dollar Index — that pits the greenback against six competing currencies — to above the key 90 level.

Part of the inflow into gold came from funds exiting bitcoin as the cryptocurrency space shuddered again at the thought of regulation — something Biden’s Treasury Secretary pick, Janet Yellen, invoked during the Senate hearing held on Tuesday to confirm her nomination.

“Bitcoin just entered the danger zone,” said Ed Moya, analyst in New York for online broker OANDA. “Demand for cryptocurrencies is plummeting as the global crypto market cap drops below the $1 trillion level. Bitcoin volatility is not going away anytime soon, but right now it seems the cryptoverse is in for a lot more pain in the short-term.”

But Moya also conceded that for gold’s rally to continue, Biden needs to get the first stimulus package of almost $2 trillion he announced last week as quickly as possible through the legislative hoops of the Senate, where Democrats aligned to him had a majority of just one.

“Gold is rising higher as President Biden’s first 100 days point to lots more stimulus, inflationary pressures, and a focus on jobs,” Moya said. “The dollar does not stand a chance if Biden delivers on his agenda and that should provide a strong backdrop of support for all commodities.”

Gold for February delivery on New York’s Comex settled up $26.30, or 1.4%, at $1,866.50 per ounce.

It ran up to as high as $1,870.25 during the day, cracking the key $1,868 level that had proven a stubborn resistance on multiple occasions over the past five months since gold came off the August record highs of almost $2,090.

Wednesday’s rally must have seemed surreal to the longs in gold who watched in disbelief over the past two weeks as bond yields, the dollar — and even bitcoin — benefited from all the talk about the impending U.S. stimulus, while the yellow metal itself lost 3.5%, bucking its standing as a proven hedge against inflation.

Even with the latest pop, there’s no certainty that gold is about to enter a one-way trade as bond yields could rip higher again in a market riding more on irrationality than convention.

Gold Near 2-Week High on Biden Stimulus Push, Commodities Rally
 

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Comments (6)
Keith Bartlett
Keith Bartlett Jan 20, 2021 7:18PM ET
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So Trump got Gold to a new high before his last day. Use to be stocks rose gold dropped. What's changed? China
Sam Truly
Sam Truly Jan 20, 2021 6:31PM ET
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Seems like gold doesn't run opposite to Dow Jones (stock markets) anymore. LOL everything is green at the same time, just one way traffic
Matheus Martinelli
Matheus Martinelli Jan 20, 2021 4:46PM ET
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I have no courage to buy ... Waiting for a deeper correction to buy.Escreva aqui seus pensamentos
Casador Del Oso
Casador Del Oso Jan 20, 2021 4:46PM ET
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I agree. 1700s or lower before buying.
Barani Krishnan
Barani Krishnan Jan 20, 2021 4:46PM ET
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Matthew, I can understand your apprehension
Androidtv medan
Androidtv medan Jan 20, 2021 4:46PM ET
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agree
The Chad Bull
The Chad Bull Jan 20, 2021 4:46PM ET
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Gold only goes up
Sol Weinberg
Sol Weinberg Jan 20, 2021 4:46PM ET
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The upside vs down side potential is vast.  There is a huge opportunity to own gold right now at a relatively cheap prices.  why wait for a small correction when this thing can take off any day and never look back at an 18 handle, let alone 17 handle.
Casador Del Oso
Casador Del Oso Jan 20, 2021 4:06PM ET
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Be careful. Gold can drop unexpectedly just as fast as it rose unexpectedly today.
Barani Krishnan
Barani Krishnan Jan 20, 2021 4:06PM ET
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True. These are highly uncertain times that call for extreme caution.
Sol Weinberg
Sol Weinberg Jan 20, 2021 4:06PM ET
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It is highly unlikely that you will ever see lower gold prices from here. the case for owning it is more compelling now than yesterday, last week, one month one year.  If you understand the landscape you don't look for a dip. you just buy
Kenneth nelson
grasshopper Jan 20, 2021 4:02PM ET
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Where's are money Sniffy
Invest Right
Invest Right Jan 20, 2021 3:57PM ET
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I think today's rally is a knee-jerk reaction to the positive sentiments around the new administration's arrival. The euphoria will fade as the reality of the economic situation starts to set in. We are a long way from getting out of this pandemic and the economic destruction it has caused. At this point, I'd just chalk it up to market reacting in the short-term to the yellin' from Yellen.
Barani Krishnan
Barani Krishnan Jan 20, 2021 3:57PM ET
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Invest Right. You're absolutely right. I expect a slide back to 1,840 and watchful eyes on the Senate to see if Biden's 2T plan gets through.
Frederick Chotsky
Chotsky Jan 20, 2021 3:57PM ET
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Barani Krishnan I don't expect his 2T plan to get passed, unless he makes it 5T.
 
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