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James Hyerczyk

Gold futures are consolidating on Thursday for a fourth session as the dollar steadied and U.S. Treasury yields held near 10-month highs, with markets waiting for a speech by Federal Reserve Chairman Jerome Powell at 17:30 GMT and President-elect Joe Biden to reveal details of his stimulus plan.

At 14:54 GMT, February Comex gold is trading $1845.40, up $0.70 or +0.04%.

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Investors are focused on U.S. Federal Reserve Chair Jerome Powell’s participation in a virtual event for further clues on U.S. monetary policy. The Fed said on Wednesday that the U.S. economy was gaining pace modestly, although rising coronavirus cases kept a lid on optimism.

Non-yielding gold is seen as a hedge against inflation likely to result from large stimulus measures.

Optimism over a report that Biden could launch a $2 trillion aid package for coronavirus relief pushed benchmark 10-year Treasury yields towards a 10-month high. Rising yields helped drive the U.S. Dollar higher, reducing foreign demand for dollar-denominated gold.

COVID-19, Renewed Benefits Boost US Weekly Jobless Claims

The number of Americans filing first-time applications for unemployment benefits surged last week, confirming a weakening in labor market conditions as a worsening COVID-19 pandemic disrupts operations at restaurants and other businesses.

Initial claims for state unemployment benefits increased 181,000 to a seasonally adjusted 965,000 for the week-ended January 9, the highest since late August. Economists polled by Reuters had forecast 795,000 applications in the latest week.

A stalling labor market recovery could put pressure on the incoming Biden administration for a bigger relief package. Joe Biden will take over from President Donald Trump next Wednesday. He is expected to propose stimulus of as much as $2 trillion on Thursday. The government approved nearly $900 billion in additional relief at the end of December.


Short-Term Outlook

Traders are hoping Fed Chair Powell discusses monetary policy in today’s Princeton Economics’ webinar. Most importantly, traders are looking for clarification of the central bank’s stance after all the recent debate on the taper timeline.

On Monday, Atlanta Fed President Raphael Bostic said he sees a possible interest rate hike as soon as the second half of next year or early 2023. The estimate is well out of consensus for the Fed, whose policymakers estimated in December that no hikes would happen through 2023.

However, Bostic noted that growth is almost entirely at the mercy of how quickly Americans are vaccinated and the coronavirus contained.

On Wednesday, despite optimism over vaccines and the likelihood of more fiscal stimulus under the incoming Biden administration, the Federal Reserve is sticking with its super-easy monetary policy, policymakers made clear on Wednesday.

Gold prices are likely to move higher on Thursday if Powell favors sticking with the super-easy monetary policy. Price could fall further if the Fed Chair fells the economy is recovering faster than previously expected.

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