Gold rose on Friday, erasing a weekly drop, with investors looking for haven assets as slimmer chances of a US stimulus deal raised questions over the country’s economic recovery.
While Republicans and Democrats are closer on a price tag for a stimulus measure — coalescing about US$900 billion — they are hung up on differences over shielding companies from virus-related lawsuits.
US equities posted their worst week since October after optimism about progress on a relief deal had helped send stock indices to records.
Bullion’s rise on dimmed stimulus prospects marks a turn from recent weeks, when the outlook for more aid stoked demand for the metal as an inflation hedge.
Now, the possibility of a hit to the recovery from the impasse is overriding that bet, fueling demand for gold as a store of value, RJO Futures Inc senior market strategist Bob Haberkorn said.
The rise in gold reflects “the market interpreting a lower move in the equities if no stimulus deal comes through by the weekend,” Haberkorn said by telephone. “It’s strange that it’s going up when there’s no deal. This looks to me that gold today is acting as a safe-haven as investors are nervous there won’t be a deal probably until the New Year.”
Gold futures for February delivery rose 0.3 percent to settle at US$1,843.60 an ounce on the Comex. The price climbed 0.2 percent this week.
Spot gold rose about 0.3 percent to US$1,844.77 in New York.
Silver, platinum and palladium declined.
Treasury yields declined, providing a boost to non-interest-bearing gold.
The EU resolved a dispute over its new aid package, unlocking US$2.2 trillion, while the European Central Bank (ECB) upped its campaign to shield the region from a possible double-dip recession with 500 billion euros (US$606 billion) more in stimulus.
The ECB moves “should benefit gold as a store of value,” Commerzbank AG analyst Daniel Briesemann said in a note. “Besides the ultra-loose monetary policy, the equally expansionary fiscal policy should also lend support.”
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