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PRECIOUS-Gold gains as dollar weakens on U.S. stimulus outlook

Published 20/01/2021, 02:06 pm
Updated 20/01/2021, 06:36 pm
© Reuters.

* Gold at $2,000/oz is still achievable - economist

* U.S. Treasury yields inch lower

* Interactive graphic tracking global spread of coronavirus: https://tmsnrt.rs/3mvcUoa (Updates prices)

By Sumita Layek

Jan 20 (Reuters) - Gold prices rose on Wednesday as the dollar weakened after U.S. Treasury Secretary nominee Janet Yellen underscored the need for a huge stimulus to help the economy recover from the coronavirus jolt, bolstering bullion's appeal as an inflation hedge.

Spot gold XAU= gained 0.8% to $1,853.80 per ounce by 0719 GMT. U.S. gold futures GCv1 added 0.7% to $1,852.80.

Yellen at her confirmation hearing on Tuesday urged lawmakers for large coronavirus relief spending, adding that the benefits outweigh the expenses of a higher debt burden.

more rounds of fiscal stimulus expected under the Joe Biden administration, further championed by Yellen's call to "act big", such measures could well pump up U.S. inflationary pressures while boosting gold prices in tandem," said FXTM market analyst Han Tan.

Gold's gains, however, have been curbed by elevated U.S. yields, but "should the greenback unwind more of its recent gains, that could clear the path for more bullion upside," Tan added.

The dollar .DXY eased further from a four-week high hit earlier in the week, while most U.S. Treasury yields fell after Yellen's call to repeal large corporations tax cuts enacted in 2017. USD/ US/

Lower yields reduce the opportunity cost of holding non-yielding bullion.

Biden's $1.9 trillion stimulus package plan will be in focus after he is sworn into office on Wednesday, while emphasis will also be on the pace of vaccine distribution against COVID-19, which has claimed 400,000 deaths in the country. at $2,000 is still achievable "probably by the mid of second quarter, when a good amount of people get inoculated and there's so much cash in the system with demand almost coming back to normal," said Howie Lee, an economist at OCBC Bank.

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"People will start looking at inflation very closely then."

Silver XAG= climbed 1.1% to $25.47 an ounce. Platinum XPT= rose 1.3% to $1,097.10 and palladium XPD= gained 0.7% to $2,368.21.

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