Money News

Gold steady as stimulus hopes offset stronger dollar

(Reuters) - Gold steadied on Tuesday, buoyed by optimism a U.S. stimulus package would eventually be passed, bolstering the metal’s appeal as an inflation hedge although gains were capped by a firmer dollar.

FILE PHOTO: A gold bar is pictured on display at Korea Gold Exchange in Seoul, South Korea, August 6, 2020. REUTERS/Kim Hong-Ji/File photo

Spot gold was steady at $1,921.71 per ounce by 1217 GMT. U.S. gold futures eased 0.2% to $1,924.50.

Robin Bhar, an independent analyst, said while a lack of time meant an agreement on a stimulus package was unlikely before the Nov. 3 U.S. election, one would “definitely” be passed after the election.

“That would be a bullish catalyst for gold,” he said.

The dollar rose 0.1% against a basket of major currencies, making gold more expensive for holders of other currencies.

Gold, which has risen nearly 27% so far this year, is considered a hedge against inflation and currency debasement amid the unprecedented global levels of stimulus to ease the economic blow from the pandemic.

A White House spokeswoman said on Monday Senate Republicans will go along with what President Donald Trump wants in terms of coronavirus relief legislation.

“There’s still plenty of volatility as we head towards the U.S. election, but over the medium-term, monetary stimulus that’s already in the system will take a long time to be withdrawn and that’s supportive for gold,” Bank of China International analyst Xiao Fu said.

Polls show Democrat rival Joe Biden leading the race for the U.S. presidency.

“A so-called ‘blue wave’ (of Democratic victories) would likely pave the way for a larger fiscal support package, which in turn could exert more upward pressure on bullion,” said FXTM market analyst Han Tan.

“A protracted delay to the U.S. elections outcome could also spur risk aversion in the interim.”

Meanwhile, appetite for riskier assets waned after Johnson & Johnson temporarily halted its COVID-19 vaccine clinical trials.

Elsewhere, silver fell 0.6% to $24.97 per ounce, platinum was flat at $873.28, while palladium rose 0.1% to $2,404.65.

Reporting by Brijesh Patel in Bengaluru; Editing by Kirsten Donovan and Steve Orlofsky