Positive signs emerging from the US Senate which suggest that a new economic stimulus package will be approved is good for gold and could push the precious metal into higher price territory, says TD Securities.
The bank says that the steps being taken to nudge forward the additional fiscal stimulus measures are very positive for gold. The bank’s strategists advised, “The downtrend is being challenged. News that Mnuchin [United States Secretary of the Treasury] and Pelosi [Speaker of the United States House of Representatives] are inching forward on a new round of fiscal stimulus is breathing life into the reflation trade, supporting equities, gold and precious metals. The latest news has turned the tide for inflation expectations and the USD, with renewed dollar weakness on the day helping turn one of gold’s key drivers back in its favour.”
Despite the expected injection of cash, the economy still has a fair few storms to weather and those are also positive for gold in the long term. According to the TD Securities strategists, “Capital will continue to seek shelter from a prolonged period of negative real rates. For gold bugs, an elevated hurdle rate for CTA liquidations will limit the risk of a large-scale liquidation — the balance of risks is firmly tilted to the upside.”
The good news if you haven’t yet bought gold is that the final agreement has not yet been reached – meaning you have a chance to buy now before prices rise further if you act quickly.