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Metals Stocks: Gold climbs to highest finish in a week on hope for further U.S. coronavirus relief

Gold futures climb Tuesday to finish at their highest in a week, rebounding from a two week low, with gains attributed to the prospects for another coronavirus fiscal package gaining more traction in Washington before the end of the year. Read More...

Gold futures climbed on Tuesday to finish at their highest in a week, rebounding from a two week low a day earlier, as prospects for another coronavirus fiscal package gained more traction in Washington before the end of the year.

The move for the metal also comes ahead of Wednesday’ monetary policy announcement from the Federal Reserve.

“Whether it’s all upside from here or not may well depend on whether the Fed can deliver tomorrow, with the central bank doing so at a time when Congress has not passed any relief of its own,” said Craig Erlam senior market analyst at Oanda, in a market update. “Bold measures may be necessary in case lawmakers on Capitol Hill fail to deliver, which could be very good for gold prices.”

February gold GCG21, +1.28% rose $23.20, or 1.3%, to settle at $1,855.30 an ounce, the highest finish for a most-active contract since Dec. 8, FactSet data show. Prices closed 0.6% lower on Monday to hit the lowest settlement since Dec. 2.

Meanwhile, silver for March delivery SIH21 added 60 cents, or 2.5%, to $24.644 an ounce, after a 0.2% loss in the previous session.

Investors were focused on a bipartisan group effort by members of House and Senate lawmakers, who on Monday proposed a two-part package that would separate the most contentious issues holding up approval from a $748 billion package that includes widely supported measures, including extended unemployment benefits and aid to business. Thornier issues, including liability protections for businesses and aid to state, local and tribal governments were put into a proposed $160 billion package.

Many economists view a further fiscal relief program as crucial to bolstering the virus-stricken economy, but also supportive for gold prices as a larger fiscal deficit, when monetized by the Federal Reserve’s bond buying program, implies a depreciation of the U.S. dollar.

“Gold is hovering once again around the $1850 level and should look to extend gains if Congress continues to take strides towards passing the compromised COVID relief bill,” said Edward Moya, who’s also a senior market analyst at Oanda.

While, “expectations for a compromise fiscal stimulus bill in Congress” was likely a factor boosting gold Tuesday, Michael Armbruster, managing partner at Altavest, told MarketWatch that he believes “gold is going to be challenged in the months ahead as 10 and 30-year Treasury yields trend higher.” 

“We have advised our clients to keep their powder dry and wait for a better buying opportunity in the months ahead,” he said. ” For tactical traders, we view the current bounce as an opportunity to lighten up on bullish positions.”

Meanwhile, the rollout of the vaccine developed by Pfizer Inc. PFE and BioNTech SE BNTX continued, with the first vaccinations delivered in the U.S. on Monday. The U.K. began inoculating first responders last week.

“The political pressure is hitting a critical level as the virus spread over the holidays is likely to trigger more lockdowns that force many businesses to close,” Moya wrote.

Precious metals took a further leg higher after mostly downbeat U.S. economic data Tuesday.

A reading of business activity in the New York state, Empire State index, has slowed over the past few months and expanded only slightly in December, according to the latest survey from the New York Fed released Tuesday. 

Separately, the U.S. import price index edged up 0.1% last month, the government said Tuesday.

U.S. industrial production growth slowed slightly in November, weighed down by a sharp decline in utility output. Industrial output rose 0.4% in November, the Federal Reserve reported Tuesday.

Elsewhere on Comex, March copper HGH21, +0.45% added 0.5% to $3.5445 a pound. January platinum PLF21, +2.76% rose 2.3% to $1,039.30 an ounce and March palladium PAH21, +0.35% rose 0.2% to $2,324 an ounce.

Read: Iron ore leads gains for industrial metals, up nearly 65% this year

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