Gold rose on Tuesday on expectations of more stimulus from the U.S. Federal Reserve to support an economy battered by coronavirus-induced restrictions, while an easing dollar lent further support.

Spot gold rose 0.2% to $1,701.20 per ounce by 1:40 p.m. EDT. U.S. gold futures rose 0.5% to $1,706.60 per ounce.

“The Fed is going to start buying bond exchange-traded funds (ETFs) for the first time ever. This is big … here’s more stimulus coming to the table and everybody knows when there’s more stimulus, you want to own more gold,” said Michael Matousek, head trader at U.S. Global Investors.

The U.S. central bank will start purchasing shares of ETFs that invest in bonds on Tuesday through its Secondary Market Corporate Credit Facility.

The facility is one of several tools recently created by the Fed to improve market functioning in the wake of the pandemic.

“Gold over past month and a half has traded in a range,” Matousek said, adding, “one of the positive things that can boost gold to breakout would be more talk about more stimulus across the globe.”

President Donald Trump on Tuesday again pushed the Fed to adopt negative interest rates, even as several members of the central bank have said they do not see a need for rates — now near zero — to move into negative territory.

Gold has risen over 12% so far this year as global central banks unleashed a wave of stimulus to limit economic damage.

Gold tends to benefit from widespread stimulus measures because it is considered a hedge against inflation and currency debasement.

The dollar index , also considered a safe store of value during uncertain times, fell 0.4% after earlier hitting an over two-week high.

Growing fears of a second wave of infections also supported gold as the Chinese city of Wuhan, where the pandemic originated, reported new cases since its lockdown was lifted.

Markets also kept a close eye on China-U.S. trade relations after Trump said he was not interested in renegotiating the phase one deal.

“The spot price of gold is consolidating just above the threshold of $1,700 in a scenario where investors remain bullish on gold but require fresh stimuli to generate another rally,” ActivTrades chief analyst Carlo Alberto De Casa said in a note.

Elsewhere, palladium fell 1.3% to $1,781 per ounce, while platinum lost 0.6% to $760. Silver was flat at $15.48 per ounce.

© Copyright Thomson Reuters 2020.

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