Gold firms near nine-year high on stimulus bets, silver soars

Gold held firm near a nine-year peak on Tuesday as expectation of higher inflation from increased stimulus countered the resultant gain in risk appetite, while silver breached the $20 level for the first time since September 2016.

Spot gold was up 0.2% at $1,818.23 per ounce by 0510 GMT after hitting its highest since September 2011 on Monday. U.S. gold futures rose 0.2% to $1,821.10.

"What's really driving the gold market is stimulus and we are going to get more of it. It's the eye candy that's driving sentiment right now," said Stephen Innes, chief market strategist at financial services firm AxiCorp.

Gold tends to benefit from widespread stimulus as the metal is widely viewed as a hedge against rising prices and currency debasement.

Analysts are, however, divided on the outlook for inflation.

European Union leaders reached a deal on a massive stimulus plan for their coronavirus-blighted economies after a fractious summit that went through the night and into its fifth day. 

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In the United States too, congressional Republicans announced plans to seek another $1 trillion in economic relief.

Along with stimulus, growing hopes for COVID-19 vaccines boosted riskier assets, tempering gold's advance.

However, rising coronavirus cases in the United States and elsewhere have added to doubts over a global economic recovery, driving flows into safe-haven assets and helping gold gain about 20% so far this year.

Further helping gold, the dollar fell to a more than four-month low versus major currencies. Silver jumped 1.6% to $20.22, its highest since August 2016.

"Silver is starting to outperform gold here. On the one hand, it's obviously appreciating on the basis of increased appeal for precious metals," IG Markets analyst Kyle Rodda said.

"On top of that, there's likely to be an element of silver catching a bit on a rebound in global industrial activity." Palladium eased 0.3% to $2,049.26 per ounce, while platinum edged 0.1% higher to $844.25.

Reuters