Gold prices come under pressure as muddled U.S fiscal stimulus strengthens dollar
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Gold futures traded lower Wednesday, after President Donald Trump announced on Tuesday that he had halted talks with congressional Democrats over another fiscal stimulus package before later calling for action on a number of individual aid measures.
Gold prices dropped on Tuesday and then extended losses after the U.S President accused Democrats of negotiating in bad faith and said he would halt talks on a stimulus package until after the November election, igniting a sharp selloff in stocks. Moments later, Trump said he would be willing to sign piecemeal aid measures, including $1,200 stimulus cheques to households and relief for airlines and small businesses.
The ICE U.S. Dollar Index, DXY, was flat Wednesday after rising as much as 0.4 percent in the previous session. The index, a measure of the dollar against a basket of six major rivals, also dropped 0.2 percent for the week.
December gold dropped $18.60, or one percent, to $1,890.20 an ounce, while December silver fell 21.1 cents, or 0.8 percent, to $23.71 an ounce.
According to economic analysts, despite the change in course, prospects for any sort of fiscal relief ahead of the election appeared unlikely, adding to deflationary pressures. They also projected that while gold is often viewed as a haven during periods of uncertainty, a rise by the U.S. dollar squelched demand for the precious metal.
Daniel Briesemann, a commodity analyst at Commerzbank, Germany asserts that at first glance, the fact that no new measures to stimulate the economy will be implemented in the near future should have been good news for gold but the price slide in late trading is as a result of the appreciating dollar which apparently was in demand as a safe haven.