Gold advances for third day with stimulus, inflation in focus

by BLOOMBERG

Gold climbed for a third straight day as investors weighed prospects for more stimulus in the U.S. and the possibility of higher consumer prices against an advance in stocks to a record. The haven’s steady rise came with traders keeping tabs on a roaring Bitcoin market.

The precious metal headed for the longest run of gains since Jan. 5 after Democrats released the first draft of key legislation that will comprise President Joe Biden’s Covid-19 relief bill. Bets on a robust package of support are helping to underpin market-derived inflation expectations, which are at multi-year highs, and have fanned the so-called reflation trade.

Bullion is rebounding after last week’s retreat to the lowest level since the start of December, when a stronger dollar and rising U.S. Treasury yields weighed on the haven asset that doesn’t offer interest. A report on Wednesday is forecast to show U.S. consumer prices rising at a quickening pace.

“Gold is rallying from a two-month low as Biden’s massive $1.9 trillion plan is about to become a reality,” said Edward Moya, senior market analyst at Oanda Corp. “The economic recovery is weak, and prospects are growing that more will be done. The reflation trade is happening a lot faster than expected.”

Spot gold advanced 0.5% to $1,839.59 an ounce by 6:58 a.m. in London, after a 2.1%, two-day gain. Silver, platinum and palladium all rose. The Bloomberg Dollar Spot Index fell 0.2% after easing 0.1% Monday.

Meanwhile, traders were also watching the surge in Bitcoin, which rallied on Monday after Tesla Inc. bought $1.5 billion of the cryptocurrency, before extending gains on Tuesday to notch a fresh record. The automaker said that its revised policies also permit it to invest in gold.

Bitcoin’s volatile ascent has spurred debate among banks whether the new product will complement bullion, or challenge its status. In December, Goldman Sachs Group Inc. said the pair will be able to coexist.