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Gold price near session highs as Congress passes $1.9 trillion stimulus package, waiting for Biden to sign

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(Kitco News) - Gold prices are trading near session highs as the market reacts to the U.S. government creates more debt to support its economy devastated by the COVID-19 pandemic.

Gold's modest jump comes after the U.S. House of Representatives passed the Senate's version of the government's proposed $1.9 trillion stimulus aid package. Now that the legislation is through Congress, it will go to President Joe Biden, who will sign it into law late in the week.

Gold prices last traded at $1,723.30 an ounce, up 0.37% on the day.

According to Reuters, one of the largest stimulus measures in American history includes $400 billion for $1,400 direct payments to most Americans, $350 billion in aid to state and local governments, an expansion of the child tax credit, and increased funding for vaccine distribution.

Saturday, after the Senate passed the stimulus bill, Biden said that U.S. consumers could expect to see checks by the end of the month.

Although the gold market continues to face stiff headwinds due to resilient strength in the U.S. dollar and rising bond yields, many analysts said that the government stimulus spending, which is creating major debt, will provide long-term support for the precious metal.

In a recent interview with Kitco News, Peter Grosskopf, CEO of Sprott Inc. said that gold remains an attractive investment to protect against global currency debasement. He added that the only way governments will be able to deal with all this deficit spending is through higher inflation.

"In the long run, monetary debasement is actually required to balance the system," he said.

Chantelle Schieven, head of research at Murenbeeld & Co, said that she expects gold to attract new investor interest as it becomes clear that real interest rates won't be able to rise much further.

Schieven said that because of growing debt levels, which will now jump by $1.9 trillion, the government couldn't afford to have 10-year bond yields push much above 2%.

"It could quickly become very expensive to service all this debt if bond yields get much above 2%," she said. "This is just one reason in a long list that still makes gold attractive."
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