Gold price higher as dollar hits multiyear low

Spot gold advanced 0.4% to $1,885.05 per ounce by 11:35 a.m. EST, while US gold futures rose 0.3% to $1,889.30 per ounce in New York.

On Wednesday, the dollar index fell to its lowest since April 2018 following US Senate Majority Leader Mitch McConnell’s decision to delay a vote on increasing covid-19 relief checks to $2,000.

This worked in favour of bullion, though only slightly, as investors’ risk appetite remains high, which is evident in the equities market.

US stocks rose once again on hopes of additional fiscal stimulus and on optimism over vaccine rollouts, as Britain became the first country to approve a vaccine developed by AstraZeneca and Oxford University.

“The bigger picture is that gold is still holding up incredibly well at these price levels and the fiscal and monetary stimulus will still be there in 2021 as the pandemic is hitting hard in the US, Europe,” Bank of China International analyst Xiao Fu told Reuters.

Investors now await the January 5 Georgia runoff elections that will determine which political party will control the US Senate, with expectations for more stimulus under a Democrat-controlled Senate and House.

2021 outlook
In anticipation of further stimulus measures, many analysts expect the US dollar to continue its downward trend heading into the new year, thus elevating the status of gold.

In its recent 2021 outlook report, JP Morgan wrote:

“We expect the US dollar to weaken modestly as the global economy continues to heal. Investors should consider diversifying their portfolios to gain exposure to assets denominated in other currencies.”

In November, analysts at Goldman Sachs said they expect gold to soar through 2021 “as the coronavirus recession gives way to higher inflation.” As a result, they see gold prices reaching as high as $2,300 an ounce.