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Gold price advances on hopes of U.S. fiscal stimulus package: Commerzbank

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Gold is up $40 from Monday's lows as the U.S. dollar retreats on new hope of the U.S. fiscal stimulus package possibly being passed, according to Commerzbank. “One key factor is likely to have been the somewhat weaker USD, as the correlation between gold and USD has been very marked of late. What is more, the hitherto deadlocked debate in U.S. Congress about another multitrillion dollar corona stimulus package appears to be moving again. The Democrats have presented an aid package worth $2.2 trillion in which concessions are also made to the Republicans,” writes Commerzbank commodity analyst Carsten Fritsch. It is still unclear whether anything will be approved before this week is over, but there is definitely growing pressure to get things done. “Certainly there is growing pressure on the Members of Congress, as the House of Representatives and a third of the Senate will be re-elected in five weeks’ time. None of the members will want to be accused then of having refused essential government aid for tactical party-political reasons,” says Fritsch. If the stimulus package is approved, the U.S. public debt will continue to climb at its fastest level since the end of the Second World War, notes the analyst. “The US M1 money supply soared by 40% year-on-year in August as a result of the Fed’s ultraloose monetary policy, for example. Against this backdrop it seems almost ludicrous that gold should have come under such pressure vis-à-vis the USD of late,” Fritsch writes. ETF demand is also signaling that the bull market is still on track. “ETF inventors appear to share this view, as they increased their holdings again yesterday for the first time in a week. Around 48 tons have flowed into the gold ETFs tracked by Bloomberg so far this month … This is also worthy of note given that the gold price is facing its biggest monthly loss since November 2016. Evidently ETF investors do not see this as any reason to turn their backs on gold,” Fritsch adds.

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