Gold spot and silver prices have recovered lost ground in recent days, climbing 3.8% and 7.6% from their respective monthly lows on the back of falling real yields and a weaker US Dollar.
This push higher in precious metal prices looks set to endure in the near term, as President Joe Biden’s pick for Treasury Secretary Janet Yellen pushes for additional deficit spending to bolster the nation’s nascent economic recovery.
The former Federal Reserve Chair stressed that “the most important thing we can do is to defeat the pandemic, to provide relief to American people and to make long-term investments that make the economy grow and benefit future generations”.
Yellen also stated that she believes “the future is likely to bring low-interest rates for a long time”, adding that “in a very low interest-rate environment like we’re in, what we’re seeing is that even though the amount of debt relative to the economy has gone up, the interest burden hasn’t”.
This appears to be an attempt to convince Senate Republicans that the government’s swelling debt load is not a reason to pull back on additional spending. Indeed, Yellen warned that avoiding “doing what we need to do now to address the pandemic and the economic damage that its causing, would likely leave us in a worse place fiscally”.
Therefore, the intensifying push for additional fiscal support, in tandem with falling real rates of return and climbing inflation expectations, may continue to put a premium on gold and silver in the coming months.
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