(Reuters) – Gold stabilized as the dollar extended its losses on Thursday, with the metal on track for its best year in a decade amid economic uncertainty and as governments around the world were distributing massive stimulus packages to mitigate the impact of the COVID-19 pandemic. Spot gold was trading around $ 1,892.97 an ounce at 1:53 p.m. EST (1853 GMT). US gold futures stabilized 0.1% at $ 1,895.10.
Bullion has gained 25% so far in 2020, as central banks and global governments have launched economic stimulus measures, laying the groundwork for higher inflation and currency degradation.
The U.S. Federal Reserve will remain extremely accommodating until 2022 and an increasingly progressive Democratic Party is looking to borrow and spend aggressively, said Tai Wong, head of trading in base and precious metals derivatives at BMO.
“Based on that, the US dollar has fallen a lot and can’t handle any rally, which is bullish gold,” he said. “However, if the vaccine is really effective and the pandemic is beaten by the summer, that may limit the gold gains.”
The unproductive metal is seen as a hedge against inflation likely to result from a record fiscal stimulus and ultra-accommodative monetary policies.
Chart: Silver outperforms other precious metals in 2020:
Outperforming gold this year with a gain of nearly 48%, its strongest performance since 2010, however, cash was down 1.2% to $ 26.30 an ounce on Thursday. “We expect silver to further outperform in 2021 based on additional favorable winds from green transformation driving increased industrial demand, as well as the expected economic recovery that will benefit silver more than gold” , said Saxo Bank analyst Ole Hansen.
Palladium looked set to post gains for a fifth consecutive year, after rising more than 25% in 2020, while platinum is on track for a second consecutive annual rise, up about 10%.
Palladium jumped 3% to $ 2,433.61 and platinum fell 0.2% to $ 1,063.52.
Both metals are used by automakers in the manufacture of catalytic converters to clean car exhaust gases. With consumers switching to single-family vehicles over public transportation, platinum group metals will benefit from a rebound in global auto sales, tighter emission standards and strong Chinese imports, said Stephen Innes, strategist. chief of Axi’s global market.
Graph: Performance of Precious Metals in 2020:
Reporting by Asha Sistla, Sumita Layek and Swati Verma in Bangalore; Edited by Jan Harvey, Barbara Lewis and Jonathan Oatis