Gold creeps closer to retaking $2,000 as investors hedge against stimulus deadlock

• Gold rose Thursday, heading for its second daily gain in a row after plunging the most in seven years on Tuesday.
• Tuesday's slump was set off by rising US bond yields.
• Both gold and silver have reversed course after a week of volatile trading and are trending higher again.
• Dollar weakness boosted the metal's relative value on Thursday, as did a continued standstill in economic stimulus talks.
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Gold jumped on Thursday, heading for its second daily gain after falling the most in seven years on Tuesday.

Spot gold rose as much as 2.6% to $1,966.36 an ounce on Thursday, continuing Wednesday's gains and pushing the metal closer to the $2,000 psychological threshold. On Tuesday, the precious metal slumped nearly 6%, the biggest one-day loss since 2013.

Gold gained moderately through the morning before launching higher at around 1:30 p.m. ET. Weakness in the US dollar boosted the metal's relative value. Prices gained further as Republicans and Democrats continued to spar in economic stimulus talks.

Senate Majority Leader Mitch McConnell announced Thursday afternoon the Senate will recess for the rest of the month, hinting at little chance for a spending deal. If a compromise is formed, senators will return within a day's notice.

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Tuesday's extraordinary plunge in gold prices came just after the metal hit a record high one week earlier, lifted by early hopes of fresh fiscal aid.

"We are continuing to see a bounce back in precious metal markets, although there's still some way to go to get back to last week's peak," said Craig Erlam, senior market analyst at OANDA, in a Thursday note. "Treasury yields have remained off their lows which is likely holding back prices."

Silver also rose, reversing losses from earlier in the week. Spot silver gained 10% to $27.65 an ounce on Thursday.

Spot gold traded at $1,950.86 per ounce as of 3:05 p.m. ET Thursday, up more than 27% year-to-date.