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Gold Rallies on Fiscal Stimulus, Weaker US Dollar

July 21, 2020 at 15:54 by Andrew Moran

Gold futures are surging to their best levels in nine years, a rally sparked by fiscal stimulus and a weaker US dollar. After being relatively quiet in recent sessions, the yellow metal is looking to carve a path to $1,900. This month, many analysts have forecast that gold prices will soon hit $2,000 on a wide range of factors, from fiscal and monetary policy to global economic uncertainty.

August gold futures increased $23.70, or 1.3%, to $1,841.10 per ounce at 15:45 GMT on Tuesday on the Comex division of the New York Mercantile Exchange. Gold prices continue their ascent, climbing more than 21% year-to-date. Over the last 12 months, the yellow metal has climbed 30%.

Silver, the sister commodity to gold, is having a breakout session on Tuesday. September silver futures rallied $1.328, or 6.58%, to $21.52 per ounce. The white metal has exploded more than 43% over the last three months, bringing its 2020 gain to just below 21%.

On Tuesday, the European Union reached a breakthrough in its $857 billion Recovery Fund, a stimulus initiative that includes grants and loans to 27 member states and dozens of sectors. This is in addition to another roughly $1 trillion budget to fund other stimulus and relief campaigns. The Recovery Fund will be financed primarily on capital markets, with a scheduled full repayment date by 2058. European officials believe this could allow the eurozone to come out of the coronavirus pandemic stronger.

The US government, meanwhile, does not think it will pass another COVID-19 relief bill until next month. The Republicans are aiming for a $1 trillion price-tag, while Democrats are calling for at least $3 trillion. Analysts think that both sides will reach a compromise, resulting in another huge spending binge for a cash-strapped government.

Metal commodities are booming on a weaker greenback as the US dollar continues to get hammered by general optimism in the broader financial market and ample dollar liquidity. The US Dollar Index tumbled 0.5% to 95.35, from an opening of 95.75. A weaker buck is good for commodities priced in dollars because it makes it cheaper for foreign investors to purchase.

In other metal markets, September copper futures advanced $0.0315, or 1.08%, to $2.947 per pound. September platinum futures jumped $57.60, or 6.71%, to $915.50 an ounce. September palladium futures soared $114.10, or 5.41%, to $2,223.50 per ounce.

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