By Barani Krishnan
Investing.com – Gold prices gained a leg higher on Tuesday, reacting to U.S. Treasury Secretary nominee Janet Yellen’s plans to fight the coronavirus-induced economic crisis with big spending.
on New York’s Comex settled up $10.30, or 0.6%, at $1,851.40 per ounce.
The benchmark gold futures contract had been caught in a wave of irrational selling lately, losing 3.5% over the past two weeks, as U.S. bond yields spiked on contrarian bets made by traders against looming multi-trillion dollar stimulus plans.
Yellen, a former chair of the Federal Reserve, said at her Senate confirmation hearing that lawmakers in Congress had to “act big” on stimulus to facilitate economic recovery from the Covid-19 pandemic.
The nominee of President-elect Joe Biden, who begins his four-year term Wednesday, said the longer-term benefits of stimulus outweighed the costs, especially with near-zero interest rates making borrowing super cheap for U.S. business.
“I think there is a consensus now that without further action, we risk a longer more painful recession now and longer-term scoring of the economy later,” Yellen said. “The smartest thing we can do is act big. In the long run I believe the benefits will far outweigh the costs, especially if you care about helping people who have been struggling for a very long time.”
While gold is generally deemed a safe haven, the yellow metal rallied on Tuesday along with an array of risk assets from stocks to oil.
The yield on the benchmark surrendered an early run higher to show a drop of 5.0 basis points by 3:15 PM ET (20:15 GMT). The drop in yields weighed on the dollar, aiding gold’s climb. The , which stacks the greenback against six competing major currencies, was down 0.3%, holding just under the key 90.5 level.
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