Gold Steadies Above $1,880 as Stimulus Drama Unfolds in US Senate

By Barani Krishnan

Investing.com - The year might be winding down but the drama isn’t over yet in gold, with investors either buckling down for a wild ride in recent days or just staying put for what is to come. Tuesday was the latter.

Gold steadied at above $1,880 an ounce — an inflection point that could help it recapture recent highs above $1,900 or fall back to the $1,870 or below levels it plumbed lately — as the U.S. Senate was left with a cliff-hanger on the $2,000 Covid-19 personal relief for Americans demanded by President Donald Trump.

Trump, who leaves office in about three weeks, stunned markets when he announced on Thursday he would not sign the Congress-approved $900 billion pandemic relief and an accompanying government funding bill of $1.4 trillion unless lawmakers in his Republican party as well as rival Democrats agreed to boost to $2,000 the personal aid of $600 for every American. While the president’s motives seemed questionable since he did not participate for weeks in negotiations for the Covid relief, Democrats rallied behind him on the matter in a rare show of unity.

Trump reversed his stance just as suddenly on Sunday and signed the bill, saying he had gotten Republicans to agree on sending separate checks to Americans to make up for the $2,000 payout. But when Democrats tried to have that allocation approved in Tuesday’s Senate session, Republican Majority Leader Mitch McConnell objected. The Democrats, however, have six Republican senators backing them and technically need only six more votes to pass the Trump maneuver.

More importantly — or troubling for McConnell — is the support from Georgian senators Kelly Loeffler and David Perdue for the $2,000 payment. Both the senators are facing run-off elections on Jan. 5 and their loss will cede Republican control of the Senate to Democrats just as President-Elect Joe Biden prepares to take office. To make matters worse for McConnell, Trump had been tweeting on the matter all Tuesday, pressuring him to agree.

“It is all about stimulus for gold and right now the uncertainty remains as to when will we see more,” said Ed Moya at New York’s OANDA.

“Trump’s push to increase stimulus checks to $2,000 may die at the Senate, but it has helped the Biden administration find out which lawmakers are willing to work with him. The prospects of more stimulus seem likely, investors will just have to wait until Biden takes office.”

Benchmark U.S. gold futures for February delivery on New York’s Comex settled Tuesday’s official session up $2.50, or 0.1%, at $1,882.90.

In Monday’s trade, February gold hit a session high of $1,904.05, before plumbing $1,874.05, on speculation over the outcome of the $2,000 personal aid demanded by Trump.

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The spot price of gold, which algorithms and hedge funds use to ultimately decide the direction in futures, was above $1,883 as well by 3:17 PM ET (20:17 GMT).

“From a technical perspective, XAU/USD is moving sideways to bullish,” technical analyst Matias Salord said in a post on FX Live, using the trading symbol for spot gold. “(But) the rally found resistance at $1900.”