Gold staggers, dollar rebounds as investors waited for US Senate election result
By Onome Amuge
Gold prices depreciated from a near eight-week high on Wednesday as the US dollar awakened from earlier losses while investors looked forward to the outcome of the Senate runoff elections in Georgia, which analysts say will now favourably affect the prospects for more fiscal stimulus following Democrats winning both seats, setting the pace for gold.
Spot gold was down 2.2 per cent to $1,905.30 per ounce, having gone as high as $1,958.90 per ounce earlier in the session. US gold futures also declined by 2.4 per cent in New York.
On the other hand, the US dollar rebounded from earlier losses, causing bullion’s New Year rally to lose momentum.
Reacting to the report, David Meger, director of metals trading at High Ridge Futures noted that the pullback on gold is a short-term move as the then potential ‘Blue Wave’ in the US Senate was seen to be dollar negative and supportive to gold from a longer term perspective.
“We have seen a small bounce off the lows in the dollar, hence a very small pullback in gold off the highs,” he added.
Georgette Boele, an analyst at Dutch bank, ABN Amro Bank NV, called for caution, as he feared investors may have decided to take profits in the thin market after the dollar briefly strengthened
Furthering weighing on gold was the 10-year US Treasury yield, which rose above one per cent for the first time since March, increasing the opportunity cost of holding non-interest bearing gold.
However, bullion maintained its focus as an inflationary hedge, with investors expecting more fiscal stimulus as the Democrats battled the Republicans in runoff votes to determine control of the US Senate.
James Steel, chief precious metals analyst at HSBC Holdings Plc, Europe’s largest bank, opined that Democratic wins should be good for gold, while Republican wins seems less bullion friendly.
He stated further that the yellow metal started the year by building on the biggest annual advance in a decade, and could gain further support should Democrats win control of the Senate.