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Gold eases on doubts over U.S. stimulus passage

Sumita Layek
·2-min read
FILE PHOTO: A worker places gold bullion on display at Hatton Garden Metals precious metal dealers in London

By Sumita Layek

(Reuters) - Gold prices inched lower on Monday due to concerns that a massive economic stimulus in the United States may not be passed smoothly, although a weaker dollar limited bullion's losses.

Spot gold fell 0.1% to $1,850.91 per ounce by 0822 GMT, having dropped 0.9% in the previous session. U.S. gold futures fell 0.2% to $1,851.80.

U.S. President Joe Biden's administration tried to head off Republican concerns that his $1.9 trillion pandemic relief proposal was too expensive on a Sunday call.

"We're seeing bigger question marks over the passage of Biden's stimulus package, Senate Republicans are starting to object with particular parts of the package," said Lachlan Shaw, National Australia Bank's head of commodity research.

"So, it does raise the question about the speed and the timing of the package. (Although,) some of the issues of the vaccine delays in the U.S. are perhaps tilting the balance in odds of favour of that stimulus," Shaw added.

Gold is considered a hedge against inflation, likely from widespread stimulus.

U.S. coronavirus cases crossed 25 million on Sunday as pace of vaccinations remained sluggish, while the European Union's vaccination drive was hit by AstraZeneca Plc's production problems.

The dollar shed 0.1% against rival currencies, making gold attractive for holders of other units.

Investors now await the U.S. Federal Reserve's policy meeting due on Jan. 26-27.

"The Fed is likely to take the conservative course and wait for additional data and assume fragility, given that the short-run effects of tackling COVID-19 more aggressively could weaken domestic economic activity," said Nicholas Frappell, global general manager at ABC Bullion.

"The longer term outlook and technical support remain bullish," so with prices above $1,840, gold could move back up to $1,870-$1,880, he added.

Silver gained 0.3% to $25.47 an ounce, platinum rose 0.1% to $1,099.41, and palladium lost 0.1% to $2,351.84.

(Reporting by Sumita Layek in Bengaluru; Editing by Subhranshu Sahu, Amy Caren Daniel and Uttaresh.V)