PRESS ROOM
US fiscal stimulus hopes take the shine off precious metals
Wednesday 13th January '21
Gold ended 2020 with positive momentum in December as continuous weakness in the US dollar supported the precious metal. Gold has, however, retreated at the start of January. US Treasury yields have risen, and dollar weakness has eased slightly on renewed hopes of additional fiscal stimulus in the US now that Democrats have established their control in both houses of the Congress as well as the White House. While a larger fiscal stimulus is expected to provide a lifeline to the US economy, ongoing policy accommodation as inflation rises is expected to be dollar negative. Moreover, while vaccines have given buoyancy to risk assets, there is always the risk of markets realising that the underlying economic reality hasn’t improved as much as the equity market rally. This realisation could potentially be triggered by fourth-quarter economic or corporate earnings data. A combination of these forces could help lift gold prices yet again.