The dollar slumped to multi-year lows against many currencies on Wednesday as currency traders looked past a new delay in U.S. stimulus cheques and maintained bets additional financial aid was still likely. The dollar has fallen steadily since U.S. President Donald Trump signed a coronavirus aid and spending bill on Sunday, because more stimulus for the world’s largest economy reduces demand for the perceived safety of holding the greenback.

While the size of relief payments is still uncertain, many analysts say the dollar is likely to resume falling next year because President-elect Joe Biden is expected to push for even more economic support measures.

“A weaker dollar is enough to create a small upward momentum for confidence to be maintained in gold,” said Michael Langford, director at corporate advisory AirGuide. He added  “Gaining a greater exposure to gold makes sense in a low-yield and weakening dollar environment.”

The dollar index .DXY fell 0.2%, hovering close to its lowest level in more than two years, as traders looked past Republican Senate Majority Leader Mitch McConnell’s decision to put off a vote on increasing COVID-19 relief checks to $2,000 from $600.

Gold is seen as a hedge against inflation and currency debasement likely to result from large stimulus measures rolled out this year to cushion the impact of the pandemic.

Also on the negative side for the US currency, positive for the yellow metal, could be the first case of covid strain in Colorado, with no travel history, as well as China’s readiness to return two Hong Kong activists out of 12 details over the border crossing.

Going ahead, the yellow metal traders will keep eyes on the updates from the US Senate as well as virus headlines for fresh impulse ahead of the North American session comprising second-tier activity and housing data for November and December respectively.

XAU/USD 4 Hour Chart:

Support: 1870.8 (S1), 1863.9 (S2), 1856.1 (S3).

Resistance: 1885.6 (R1), 1893.4 (R2), 1900.3 (R3).

In the prevailing environment where US dollar is under pressure, we expect a bullish trend for XAU/USD.