Gold rose to a nine-year high on Tuesday as expectation of higher inflation from increased stimulus overshadowed the resultant gain in risk appetite, while silver breached the $20 level for the first time since September 2016.
Spot gold was up 0.4 per cent at $1,822.11 per ounce by 0730 GMT after hitting its highest since September 2011. US gold futures rose 0.4 per cent to $1,823.80.
“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.
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.
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 per cent so far this year.
Further helping gold, the dollar fell to a more than four-month low versus major currencies.
Silver jumped 2.2 per cent to $20.33, 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 rose 1 per cent to $2,075.54 per ounce, while platinum was steady at $843.92.