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Gold Struggles for Direction Amid US Fiscal Stimulus, New COVID-19 Strain

December 21, 2020 at 18:11 by Andrew Moran

Gold futures slipped below $1,900 to kick off the Christmas-shortened trading week. The yellow metal had been teetering between positive and negative territory throughout the session as financial markets weigh the US coronavirus stimulus package, the new coronavirus strain in the UK, and a strengthening US dollar.

January gold futures tumbled $1.80, or 0.21%, to $1,884.70 per ounce at 16:49 GMT on Monday on the COMEX division of the New York Mercantile Exchange. Gold prices are coming off a weekly gain of about 3%, adding to their year-to-date rally of more than 24%.

Silver, the sister commodity to gold, is surging to start the trading week. March silver futures soared $0.422, or 1.62%, to $26.46 per ounce. The white metal spiked more than 9% last week, bringing its 2020 increase to nearly 50%. Silver prices have been volatile since Sunday night, topping $27 before cratering back down to around $25.

Global financial markets have been spooked by developments that a new coronavirus strain has intensified lockdown measures in the UK and in many parts of Europe. Many countries have imposed border and travel restrictions on Great Britain over concerns about this new strain. Some fear that the mutation of COVID-19 could bypass the efficacy of the first generation of the coronavirus vaccines, although medical experts say that it is unlikely to happen — for now.

The virus concerned offset the $908 billion coronavirus stimulus and relief package in the US. What was supposed to ignite a significant rally among metal commodities in the broader financial markets was overshadowed by the news.

Congress’ new agreement contains a $600 stimulus check for most Americans and an enhancement of $300 in unemployment insurance (UI) benefits until March 24, 2021. Officials believe that stimulus checks could start being delivered as early as next week. The Democrats stated that this is essentially a down payment until President-Elect Joe Biden takes office, which has sparked inflation woes.

The latest uncertainty has prompted investors to seek refuge in the greenback. The US Dollar Index, which measures the buck against a basket of currencies, rose 0.24% to 90.24, from an opening of 90.02. A stronger greenback is bad for dollar-pegged commodities because it makes it more expensive for foreign investors to purchase. The index has cratered close to 7% year-to-date.

In other metal markets, January copper futures declined $0.055, or 1.51%, to $3.5775 per pound. January platinum futures plummeted $27.40, or 2.63%, to $1,015.70 an ounce. January palladium futures plunged $56.00, or 2.36%, to $2,316.00 per ounce.

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