“The Trump news trumps everything else – the economic data, the stimulus package, etc. Said Phoenix Futures and Options LLC President Kevin Grady. “Gold has retreated a bit. But with all the money available, the yellow metal should be higher. There are a lot of speculators in the gold space right now. They are pushing the market down. ”
For now, gold appears to be stuck as it trades around $ 1,900 an ounce, Grady told Kitco News on Friday.
Trump’s coronavirus news is expected to push people toward gold amid heightened uncertainty, but as gold is currently trading in tandem with stocks, a lot depends on the market’s reaction to next week’s developments. , Grady explained.
“Gold and stocks trade together. There is going to be a lot of uncertainty, and there is a risk that investors will choose to liquidate their positions just to protect themselves in case something bad happens over the weekend, ”he said. .
Next week, it will be a question of monitoring the progress of Trump’s illness and determining whether there is a chance the government could get approval for the additional stimulus, said Peter Hug, global trade director of Kitco Metals.
“If the president gets really sick, you would expect it to be positive for the metal simply because of the uncertainty of the government’s ability to function without Trump. Counterbalancing this notion is the stock market, which is likely to continue to weaken as people raise cash, which is negative for metals, ”Hug said. “Based on what we know about Trump, will the government be able to put together the stimulus package before the election?” The market needs it. If they don’t get it, that’s problematic for stocks and metals as well. ”
It is in Republicans’ best interests to secure stimulus to help stabilize markets ahead of the election, Hug noted. “Otherwise, with a second wave coming and the economy slowing, there’s going to be a slowdown. ”
Hug also mentioned the worst and best scenarios for next week.
More serious implications for the president would be the worst-case scenario, he said. “This could potentially include the liquidation of the stock market. People are already scared, so the first instinct might be to run for cash, which will hurt commodities and stocks. Gold could trade at $ 1,850 which is a pretty solid line. If we lose that, we could test in the low $ 1,800, ”Hug said.
The best-case scenario would be for Trump to show symptoms but still be able to function. Moreover, if the stimulus package is adopted and the stock market stabilizes. “The upside potential for gold is a close above $ 1,925 and then $ 1,975,” Hug added.
Right now, Trump’s positive coronavirus test seems ‘just a bump in the road’, but this week’s headlines ‘have raised more questions than answers,’ said Walsh Trading co-director , Sean Lusk.
Seasonality is also starting to play a role here, Lust added, noting that the first two weeks of October are traditionally good for gold. “Seasonally, gold will rally in late summer, sell after Labor Day, redeem in October, and correct again in November,” Lusk said. “Look for that market to buy. Investors will reverse the lows. ”
There is still a lot of money on the sidelines ahead of the election, and there is a chance gold will try to climb back to $ 1,980 over the next two weeks, Lusk added.
“We had a decent correction in gold of around $ 200 from its highs. As a percentage, gold at the $ 1,980 per ounce level represents a gain of about 30% year-to-date. These are levels that will need to be recovered. », Lusk noted.
To watch next week: debate between the US vice president, the stimulus package and the minutes of the FOMC meeting
With Trump in quarantine for the next two weeks, all eyes will be on the Oct. 7 vice-presidential debate between Vice President Mike Pence and Joe Biden’s running mate Kamala Harris, analysts said.
“With Joe Biden leading the opinion polls, Kamala Harris’s job will be to prevent Pence from scoring too many points,” ING FX strategists said Friday. “How will the dollar trade in light of these political developments? The first signs are that a big lead for Democrats is seen to reduce the risk of a contested election, support risky assets and gently weigh on the dollar. Any Republican return could be reversed. this trend. ”
The other big item on the agenda is the minutes of the Federal Reserve’s September meeting, which will also be released on Wednesday.
The message markets receive will likely be very similar to the one Fed Chairman Jerome Powell spoke to at the press conference following the September rate announcement.
“There is little prospect of an interest rate hike in the next two years with officials and the FOMC dot chart; chart suggesting that it could be 2024 before we see an interest rate hike, ”said James Knightley, ING’s chief international economist.
Any progress on the stimulus package talks will also be closely watched by the markets with the potential for significant ripples in equities and the precious metals market, ING added.
In terms of data, there’s the US ISM non-manufacturing PMI on Monday and jobless claims on Thursday.
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