Gold steadied near a two-week high on Tuesday on a subdued dollar and investor hopes for additional fiscal stimulus to help the economy as coronavirus cases continued to mount.
Spot gold was little changed at $1,863.20 per ounce by 1037 GMT, having touched its highest since Nov. 23 of $1,871.52 earlier in the session.
U.S. gold futures were up 0.1% to $1,867.80.
“We saw this washout in gold price and break of technical levels. Now that it has recovered again in the same environment where real rates are coming under pressure causing the dollar to weaken, this is normally an environment where gold prices increase,” said UBS analyst Giovanni Staunovo.
“Something to focus on is the upcoming U.S. Federal Reserve meeting and if the Congress finds a deal and agrees on a fiscal package. This will increase inflation expectations and also be a supportive element (for gold).”
The U.S. Congress is expected to vote this week on a one-week stopgap funding bill to provide more time to reach a deal on COVID-19 relief as imposition of stricter lockdowns to control surging infections highlighted the need for more stimulus.
Gold is still up by around a fifth this year, benefiting from its status as a hedge against inflation that could result from the large stimulus measures unleashed in 2020.
Meanwhile, Britain began mass vaccination of its population against COVID-19 on Tuesday.
“The vaccine is more widely available for the rest of the population only next year, not now. It’s only the UK which started distribution. The challenges on the economic side are still present and still need support from the fiscal or monetary side,” said Staunovo, adding that the vaccine may negatively impact gold in the second half of 2021.
Silver rose 0.3% to $24.57 per ounce, while palladium fell 0.8% to $2,313.07 and platinum was down 0.1% at $1,020.20.
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