By Barani Krishnan
Investing.com - It would have probably gone lower had it not been for President Donald Trump’s latest stimulus drama.
Gold halted a three-day slide on Wednesday as the dollar slid after a one-day ramp-up and as markets awaited the outcome of the Congress-approved $900 billion Covid-19 relief that the outgoing U.S. president refused to sign without additional pay outs to ordinary Americans.
Trump stunned investors late on Tuesday by releasing a video where he called the $600 of personal aid due under the package a “disgrace,” demanding that it be boosted to $2,000 an individual or $4,000 per family. The president, whose term ends on Jan. 20, has said he will not sign the bill otherwise and has not made it clear if he will veto it.
The relief package passed Congress with overwhelming support from both Republicans aligned to Trump and Democrats opposed to him.
After weeks of steering clear of the stimulus talks, which took months for the two sides to conclude, Trump is now demanding various changes to the bill, including overseas allocations. Democrats have jumped in support of his demand for bigger individual payouts. But Trump’s demands pose a dilemma to both sides, as Americans urgently need relief from the Covid-19 crisis, while a veto could sink an accompanying $1.4 trillion funding to keep the government open.
“Gold prices are little changed awaiting the Republican response to Trump’s last-minute demand to boost direct payments to Americans,” said Ed Moya, analyst at New York’s OANDA.
“Gold could have a choppy rest of the year, but if Republicans capitulate and the price tag of stimulus grows, Gold could break above the $1900 level.”
At Wednesday’s settlement, benchmark gold futures for February delivery on New York’s Comex settled at $1,878.10, up $7.80, or 0.4%.
It was the first rise since Friday for gold, which had bucked expectations for a rally after the stimulus passed by Congress. The yellow metal had lost a cumulative 1% in the previous three sessions, falling below technical support at $1,868. In Wednesday’s trade, it got to as high as $1,883.40.
“If gold breaks higher, the upside target is $1,889,” said analyst Yohay Elam said in a blog on fxstreet.com, citing Fibonnaci levels. “Further down, the downside target for the precious metal is $1,848.”