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James Hyerczyk
Comex Gold

Gold futures are moving higher on Wednesday as a positive outlook for a new fiscal stimulus package from U.S. policymakers is weakening the U.S. Dollar, while driving up foreign demand for dollar-denominated gold.

Additionally, optimism that U.S. lawmakers could reach an agreement on a pre-election coronavirus relief deal is also bolstering gold’s appeal as a hedge against inflation.

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At 10:56 GMT, December Comex gold futures are trading $1922.20, up $6.80 or +0.36%.

Latest Stimulus News

The White House and Democrats in the U.S. Congress moved closer to agreement on Tuesday as President Donald Trump said he was willing to accept a large aid bill despite opposition from his Republican Party.

Also on Tuesday, White House Chief of Staff Mark Meadows said that House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin have made “good progress” on stimulus talks, before adding that they “still have a ways to go” before an agreement is reached.

Following Pelosi and Mnuchin’s meeting on Tuesday, Meadows told CNBC’s “Closing Bell” that the two will talk again on Wednesday, and that he hopes to see “some kind of agreement before the weekend.”

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Rising Treasury Yields May Be Capping Gains

The news that Trump was willing to accept a large aid bill sent U.S. 10-year Treasury yields to a four-month high, in anticipation of more government borrowing, and pressed the dollar index to its lowest since September by boosting investors’ mood.

Daily Forecast

The early price action suggests speculators are increasing bets on a stimulus deal being agreed upon before the November 3 election. Despite this optimism, there are still worries that the deal may not be reached in a timely manner.

Without the new fiscal stimulus package, the U.S. economic recovery is at risk. This could revive the U.S. Dollar’s appeal as a safe-haven asset over the short-turn, which would lead to renewed selling pressure on gold.

As we’ve been saying for weeks, new stimulus is coming. Traders just don’t know the size of the package and the timing of it. A “sooner-than-later” package could spike gold prices higher over the short-run. No deal, would weaken prices but longer-term buyers will be there to buy the dip.

For a look at all of today’s economic events, check out our economic calendar.

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