Gold futures ended higher Tuesday, clawing back from losses last week that drove the precious metal to its lowest settlement in seven weeks.
The move up for bullion comes against the backdrop of a softer U.S. dollar and as the market digested testimony from Janet Yellen, President-elect Joe Biden’s pick to run the Treasury Department, to the Senate Finance Committee Tuesday.
The day’s gain for gold was “clearly” related to the move lower in the U.S. dollar, spurred on by Janet Yellen, President-elect Joe Biden’s nominee to head the Treasury Department, who called for “additional stimulus programs in the coming weeks or months,” said Jeff Wright, executive vice president of GoldMining Inc.
In the testimony, Yellen said that “with interest rates at historic lows, the smartest thing we can do is act big.” The benefits will “far outweigh the costs, especially if we care about helping people who have been struggling for a very long time.”
The words “act big,” imply that there is “no concern regarding U.S. deficits or the ability to think about balancing a budget,” Wright told MarketWatch. “With both, gold will go higher soon.”
Yellen also said that “without further action, we risk a longer, more painful recession now — and long-term scarring of the economy later.”
In a note ahead of Yellen’s comments, Edward Moya, senior market analyst at Oanda, said her testimony could “serve as a bullish springboard for gold as investors prepare for another wave of ultra-easiness now that the [Federal Reserve] and Treasury will have improved coordination.”
“Permanent economic scarring to the economy will keep fiscal stimulus coming for the next couple years,” even as the U.S. economy is clearly on the other side of COVID, he said.
Against that backdrop, February gold GC00, 0.47% GCH21, +0.53% climbed $10.30, or 0.6%, to settle at $1,840.20 an ounce. Prices recouped part of Friday’s 1.2% decline, which drove gold to its lowest finish since Dec. 1 and prompted a weekly slide of 0.3%. Regular Comex trading was closed Monday for the Martin Luther King, Jr. holiday.
Yellen’s remarks come after Biden, last week, rolled out a coronavirus relief plan with a price tag of $1.9 trillion, a sweeping measure that includes cash payments to Americans and money for distributing Covid-19 vaccines.
Gold prices in the longer term are expected to rise amid greater government spending and a weakening buck.
Meanwhile, weakness in the currency helped to boost prices for dollar-denominated gold prices. The greenback, as measured by the ICE U.S. Dollar Index DXY, was down 0.3% at 90.525 Tuesday as gold futures settled.
“Gold may be getting some help from a weaker dollar today, but long-term Treasury yields are going up for the same reason the dollar is going down,” said Michael Armbruster, managing partner at Altavest. In the near-term, rising Treasury yields are negative for gold so we remain negative on gold prices despite a falling dollar.”
“We think we will get a better buying opportunity for gold somewhere below $1,800 in the near future,” said Armbruster.
Elsewhere in metals, silver for March delivery SIH21, 0.20% SI00, 0.20% rose 45 cents, or 1.8%, to $25.32 an ounce, after a 0.9% fall last week.
March copper HGH21, 0.23% tacked on 0.9% to $3.6335 a pound. April platinum PLJ21, 0.38% added 0.2%, to $1,092 an ounce, while March palladium PAH21, 0.11% lost 1.3% to $2,365 an ounce.