Gold firmed near an over one-week high on Wednesday as prospects of a U.S. coronavirus relief package reinforced its appeal as a hedge against likely inflation and sent the dollar to a multi-year trough.
Top U.S. economic officials on Tuesday urged Congress to provide more help for small businesses to cope with the pandemic, while support was growing for a $1.4 trillion spending bill.
Spot gold rose 0.7% to $1,827.63 per ounce. Prices peaked at $1,832.20, the highest since Nov. 24, earlier in the session. U.S. gold futures settled up 0.6% at $1,830.20.
"We're one step closer to the next stimulus package; that has weakened the dollar, eroding the currency and supporting commodity prices across the board, including gold and silver," said David Meger, director of metals trading at High Ridge Futures.
U.S. economic growth is moderating as the coronavirus spreads and fiscal help fades, Philadelphia Federal Reserve Bank President Patrick Harker said on Wednesday.
Raising gold's appeal for other currency holders, the dollar held near a 2-1/2 year low. Non-yielding bullion, which has risen over 20% so far this year, tends to benefit from widespread stimulus measures because it is widely viewed as a hedge against inflation and currency debasement that could result from the stimulus.
The stimulus would drive "some physical demand, encourage notions of problematic price inflation in the coming months," said Kitco Metals senior analyst Jim Wyckoff.
Gold, however, registered its worst monthly performance in four years in November, weighed down by optimism over a vaccine-fuelled economic rebound.
Britain on Wednesday became the first country to approve Pfizer-BioNTech's COVID-19 vaccine.
Elsewhere, silver fell 0.2% to $23.96 per ounce. Platinum rose 1% to $1,009.90 and palladium eased 0.4% to $2,397.63.