Price of Gold Fundamental Daily Forecast – Traders Showing Little Confidence in Additional Stimulus Measures

Gold futures are trading flat on Wednesday as investors await a major catalyst that will trigger an increase in volatility. Without it, the market is poised to remain inside a tight trading range with extremely low holiday volume and the absence of major players keeping both a lid and a floor on the market at the same time.

At 13:00 GMT, February Comex gold is trading $1883.70, up $0.80 or +0.04%.

Traders are also being influenced by the events in Washington where Congress may do battle over additional fiscal stimulus after U.S. Senate Majority Leader Mitch McConnell postponed a vote by the Republican-led Senate on increased pandemic aid checks to Americans after the Democratic-led House of Representatives overwhelming voted in favor of additional aid.

Meanwhile, Treasury Secretary Steven Mnuchin said that the $600 stimulus checks that are part of a $2.3 trillion package signed into law last week have begun to be distributed.

Supportive Factors

Gold has benefited this year from massive stimulus rollouts from the Federal Reserve and the U.S. government designed to curtail the economic impact of the pandemic as it is seen as a hedge against inflation and currency debasement.

Additionally, demand for risky assets has tarnished the U.S. Dollar’s appeal as a safe-haven asset, making dollar-denominated gold a more attractive asset.

Gains Being Capped

Coronavirus cases continue to soar globally, with Britain reporting the highest number of new infections since mass testing began in mid-2020, while the first case of a new infectious virus variant was found in the United States. However, this news hasn’t rattled investors enough to aggressively buy gold. This is because they have confidence at this time in the vaccines.

Vaccine rollouts in Europe gathered pace with the European Union set to buy an extra 100 million doses of Pfizer and BioNTech’s COVID-19 vaccine.

The U.K. and the U.S. have been vaccinating for weeks with some citizens already receiving their second doses.

Short-Term Outlook

The extremely low volume and the absence of money managers and hedge funds are likely preventing gold prices from moving this much too this week.

The lack of progress toward additional stimulus is also weighing on prices. If the Senate does approve additional stimulus then we’re likely to see a spike to the upside. If the Senate passes on the move then gold bulls will have to wait until President-elect Biden takes office. He has promised even bigger stimulus measures, but it depends on who wins the Georgia Senate race next week. If the Democrats win control of the House and Senate then Biden should have an easy time getting what he wants.

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