The precious metal extended its gains following Tuesday’s comments from Biden’s Treasury Secretary nominee Janet Yellen that weakened the dollar. Specifically, Yellen told the Senate Finance Committee that a slew of state spending was needed to fight the covid-19 pandemic, while playing down concerns about the debt it creates.
She also disavowed using exchange-rate policy to weaken the dollar, a difference from outgoing Treasury Secretary Steven Mnuchin, without explicitly referring to a “strong” dollar.
With Biden officially becoming the 46th president of the US on Wednesday, investors will now turn their focus on his $1.9 trillion stimulus package proposal and the pace of covid-19 vaccine distribution.
A JPMorgan fund manager told Bloomberg this week that increased government spending and the global vaccine roll-out would revive inflation risks.
Gold is considered a hedge against inflation, which can result from widespread stimulus measures. It is also seen as a safe haven against any economic or political uncertainties.
“Gold at $2,000 is still achievable, probably by the middle of the second quarter when a good amount of people get inoculated and there’s so much cash in the system with demand almost coming back to normal,” Howie Lee, an economist at OCBC Bank, told Reuters.
“People will start looking at inflation very closely then,” Lee added.
(With files from Bloomberg and Reuters)
