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Gold Steadies Above $1,880 as Stimulus Drama Unfolds in US Senate

Published 12/29/2020, 03:08 PM
Updated 12/29/2020, 03:08 PM
© Reuters.

© Reuters.

By Barani Krishnan

Investing.com - The year might be winding down but the drama isn’t over yet in gold, with investors either buckling down for a wild ride in recent days or just staying put for what is to come. Tuesday was the latter.

Gold steadied at above $1,880 an ounce — an inflection point that could help it recapture recent highs above $1,900 or fall back to the $1,870 or below levels it plumbed lately — as the U.S. Senate was left with a cliff-hanger on the $2,000 Covid-19 personal relief for Americans demanded by President Donald Trump.

Trump, who leaves office in about three weeks, stunned markets when he announced on Thursday he would not sign the Congress-approved $900 billion pandemic relief and an accompanying government funding bill of $1.4 trillion unless lawmakers in his Republican party as well as rival Democrats agreed to boost to $2,000 the personal aid of $600 for every American. While the president’s motives seemed questionable since he did not participate for weeks in negotiations for the Covid relief, Democrats rallied behind him on the matter in a rare show of unity.

Trump reversed his stance just as suddenly on Sunday and signed the bill, saying he had gotten Republicans to agree on sending separate checks to Americans to make up for the $2,000 payout. But when Democrats tried to have that allocation approved in Tuesday’s Senate session, Republican Majority Leader Mitch McConnell objected. The Democrats, however, have six Republican senators backing them and technically need only six more votes to pass the Trump maneuver.

More importantly — or troubling for McConnell — is the support from Georgian senators Kelly Loeffler and David Perdue for the $2,000 payment. Both the senators are facing run-off elections on Jan. 5 and their loss will cede Republican control of the Senate to Democrats just as President-Elect Joe Biden prepares to take office. To make matters worse for McConnell, Trump had been tweeting on the matter all Tuesday, pressuring him to agree.

“It is all about stimulus for gold and right now the uncertainty remains as to when will we see more,” said Ed Moya at New York’s OANDA.

“Trump’s push to increase stimulus checks to $2,000 may die at the Senate, but it has helped the Biden administration find out which lawmakers are willing to work with him. The prospects of more stimulus seem likely, investors will just have to wait until Biden takes office.”

Benchmark U.S. gold futures for February delivery on New York’s Comex settled Tuesday’s official session up $2.50, or 0.1%, at $1,882.90.

In Monday’s trade, February gold hit a session high of $1,904.05, before plumbing $1,874.05, on speculation over the outcome of the $2,000 personal aid demanded by Trump.

The spot price of gold, which algorithms and hedge funds use to ultimately decide the direction in futures, was above $1,883 as well by 3:17 PM ET (20:17 GMT).

“From a technical perspective, XAU/USD is moving sideways to bullish,” technical analyst Matias Salord said in a post on FX Live, using the trading symbol for spot gold. “(But) the rally found resistance at $1900.”

Latest comments

Gold will set a base price of 1920 by June 2021 and from there it will go only up and up. Gold will touch 2000 mark once stimulus is passed and Biden winning Senator in his favor or else it will take another couple of months to touch 2000. But uy definately will go up.
we will have 2300 in 4 moths from now
This is perception management. They will make you bankrupt sure
Wrong analysis by Mathias Salord ... technically ... we can see on the weekly chart that xauusd entered a situation of target decline for 1835 to 1810 possible again or just back to 1850 to complete a retest channel near the last bottom candle in 1790  ... and I told you sometime ago that the best seller is in 1900 until Biden arrives ... because the middle of the tunnel's resistance is 1895 ... this "little stimulus" can simply consume fuel for gold back to the maximum 1930 60, but need to go down to those points again early for take fuel ... very probable next week a downward trend  after a little upside on next months and sometime after 6 to 8 months for gold back to normal zone prices 1600 1300 ... gold is not bitcoin a bubble about to explode and ******many speculators ....anyway .... thanks Barani for the article .... you always do a great job
 in your dream :)
seems like you are not understanding treasury bills , bond markets and inflation. I would do a bit more analysis based on the economic calendar data and not on reports from investing.com . You seem like you just started trading recently.
Gold is up for sure. But the question is how high can it go before the next crash?  It is coming! The Judgement Day!
very well described the gold delemma .
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