Gold prices rose over 1% to a one-month peak on Thursday as the dollar spiralled lower on hopes of more coronavirus relief aid and the U.S. Federal Reserve's pledge to funnel more cash and keep interest rates pinned low.
Spot gold jumped 1.5% to $1,892.31 per ounce, having hit a one-month high of $1,895.81 earlier in the session. U.S. gold futures were up 2.1% at $1,898.60.
"A combination of an additional stimulus package along with additional bond buying and asset purchases from the Fed has clearly driven gold and silver prices higher," said David Meger, director of metals trading at High Ridge Futures.
An additional stimulus relief package is weighing on the dollar due to more money being pumped into the supply, Meger added.
Lawmakers sought to hammer out a $900 billion COVID-19 aid bill with a Friday deadline to avert a government shutdown looming, buoying gold prices and sending the dollar to a multi year trough. With interest rates anchored at zero, the Fed vowed to keep pumping cash into financial markets until the U.S. economy's recovery is secure.
Bullion, considered a hedge against inflation and currency debasement, has risen over 24% so far this year amid the unprecedented stimulus unleashed globally.
Raising concerns over the U.S. economy's recovery, the number of Americans filing first-time claims for jobless benefits unexpectedly rose last week as mounting COVID-19 infections battered business operations.
"Fundamentally, gold is still quite strong and if it closes above $1,880 an ounce today we might see it going up to $1,950 before the year ends," said Ravindra Rao, vice president, commodities at Kotak Securities.
The Bank of England kept its stimulus programme unchanged as it awaited the outcome of Britain's trade deal talks with the European Union. In other metals, silver rose 2.5% to $25.98 an ounce.
Platinum gained 1.2% to $1,047.09 and palladium was up 0.8% at $2,344.72.