By Barani Krishnan
Investing.com - Gold prices resumed their run higher, picking up from last week’s three-day rally, on signs that U.S. lawmakers were closing in on a fiscal deal to keep the government open and continue with paycheck protection for millions of Americans stressed by the Covid-19.
Gold for February delivery on New York’s Comex settled Monday’s trade up $26, or 1.4%, at $1,866 an ounce.
Last week, the benchmark gold futures contract gained almost $60, or 3.3%, amid signs that the U.S. Congress might reach agreement soon on a $908 billion Covid-19 stimulus bill. That rebound helped erase a significant portion of the previous week’s near 5% loss, which was Comex gold’s biggest weekly plunge since July.
The spot price of gold, which reflects real-time trades in bullion, was up $21.15, or 1.2%, to $1,858.47 by 3:08 PM ET (20:08 GMT). For the week, bullion rose 2.8%.
“Gold is surging higher and could look to make a run towards the $1,900 level before the end of the week,” said Ed Moya, analyst at New York’s OANDA.
Monday’s rally in gold was reignited by Congress’ aim to scrape together a coronavirus relief package before the end of this week and prevent a lapse of benefits that could send millions of Americans spiraling further into financial peril at the end of the year.
Gold prices typically rally in any stimulus or monetary expansion exercise.
Lawmakers aim to pass both pandemic aid and spending legislation before the government shuts down on Saturday, CNBC reported. They will have to quickly resolve several sticking points to meet the deadline.
A bipartisan group of U.S. lawmakers hopes to release a more detailed outline of its $908 billion aid proposal on Monday as it prepares legislative text.
Democrats, who control the House of Representatives, have backed the plan as the basis for an emergency relief bill as a sustained Covid-19 infection surge stresses hospitals across the country. Republicans, who have a majority in the Senate, have indicated they will support the measure without specifying how much exactly in dollars and cents.
Gold is emerging from one of its most brutal sell-offs ever after dynamic breakthroughs in COVID-19 vaccines and their potential availability before Christmas caused a run on money in safe-havens.
The yellow metal lost about 6% of its value in November, its most for a month since 2016 and fell into $1,700 territory. Investors have in recent weeks directed money mostly into stock markets and other risk assets such as oil, as those witnessed an epic rally amid the notion that vaccines and therapeutics would soon bring an end to the spread of the coronavirus.
Despite the continued emphasis on risk, gold as a haven is rallying again on talk of a new U.S. Covid-19 stimulus effort
For context, Congress originally passed in March the Coronavirus Aid, Relief and Economic Security (CARES) Act, dispensing roughly $3 trillion as paycheck protection for workers, loans and grants for businesses and other personal aid for qualifying citizens and residents.
In the past few months, however, Democrats have been locked in a bitter debate with the Republicans on a successive relief plan to the CARES Act. The dispute has basically been over the size of the next stimulus as thousands of Americans, particularly those in the airlines sector, risked losing their jobs without further aid.
The stalemate was finally broken last week with the $908 billion relief bill proposed by a bipartisan group.