The post-Trump era? Gold price expected to see $ 2,000 next week as attention turns to coronavirus – analysts


Editor’s Note: In just a few minutes, discover our quick roundup of the must-see news and expert opinions that have moved precious metals and financial markets. Register here!(Kitco News) The gold market reaping benefits from a weaker US dollar in an uncertain environment, where markets are betting on a victory for Biden.

The precious metal began its rally on Thursday with prices rising more than $ 50 amid uncertainty and the weak US dollar as Democratic candidate Joe Biden maintained his lead against US President Donald Trump.

Based on the Electoral College’s latest tally, Biden has 264 votes to 214. Ballots from shifting states, such as Nevada, Georgia and Pennsylvania, are still counted on Friday afternoon.

At the time of writing, December Comex gold futures were trading at $ 1,954.80, up 0.41% on the day, posting their best weekly gains since late July.

“Gold has really followed the dollar, the COVID-19 crisis, and the stimulus talks,” Afshin Nabavi, vice president of precious metals trader MKS SA, told Kitco on Friday. “There was a mix of safe-haven buying. The dollar was pretty much in free fall which helped the precious Thursday. Everyone under the sun was interested in the safe haven. ”

With all this electoral uncertainty amid a second wave of coronavirus, gold could climb back to the $ 2,000 an ounce level next week, Nabavi said.

“We are now around $ 1,950 to $ 555. If we can get past that, I think $ 2,000 is in the cards, ”he said. “The economy is in big trouble around the world because of the pandemic, stimulus packages will continue to print money and the precious metal will benefit on the upside. ”

More information on the litigation and vote recounts could shake the markets next week, Nabavi warned. “I expect a lot of resistance from Trump, even if the election says otherwise. It could be a bit of a mess, and it will also help precious to go higher. ”

Gold at $ 1,980 has been identified as a key resistance by TD Securities commodities strategist Daniel Ghali, who views gold as overbought at the moment.

“The reason is that gold prices have exceeded real rates,” he told Kitco News on Friday. “The most likely outcome is Biden’s presidency with the Republican Senate, which means less fiscal stimulus and short-term blockage. ”

Election expectations

For next week, markets are banking on a victory for Biden and a Republican-controlled Senate, which means a divided government.

“While not official, Biden is likely to be the next president with 306 electoral votes. The margins are too wide for recounts or litigation to reverse the trend. The Senate looks likely to end up with a 52-48 Republican majority, a net gain of just one seat for Democrats. However, the race is likely deadlocked at 50-48 (R / D) pending a second round on January 5 at the two GA seats, which is likely to attract huge media, political and financial attention over the two months to see if Democrats can win both seats and take control of the Senate, ”TD Securities strategists said Friday.

What this means for future policy are less dramatic changes, including more modest fiscal stimulus. “A divided government should mean fewer major policy changes, but we expect a small stimulus package ($ 500 billion) to pass in December-January,” TD strategists added.

The US dollar is likely to continue to lose steam as the end of the year approaches, analysts added.

“The markets are confident that Biden will win as the final votes are counted, and rising risk assets don’t seem overly concerned with the steps President Trump has taken to challenge the outcome,” the strategist said. ING FX Francesco Pesole. “In the forex market, the USD may remain under pressure as investors continue to bet on a rally of the rest of the world in the post-Trump era. ”

In the coming week, the focus will remain on the US election and Biden’s chances of securing a sufficiently convincing victory. After that, however, attention will shift to the number of coronaviruses in the United States, which is recording a record high of more than 100,000 new cases per day, Pesole added.

“Price action over the past week … suggests investors are positioning themselves for a post-Trump era, which, with a Fed holding rates close to zero, is seen as a negative dollar,” the strategist added. . “The biggest threat… comes from COVID-19. Daily new COVID cases in the United States exceed 100,000 a day, which could prompt state governors to shut down bars and restaurants again – a move that could strike a very bullish current sentiment. ”

Rising coronavirus cases around the world pose “the greatest economic challenge,” said Avery Shenfeld, chief economist at CIBC Capital Markets.

“We have watched the numbers obsessively. No, not those numbers, because we don’t really need to hear from all the county clerks in the United States. When the dust settles on the elections, the market will turn to the coronavirus again. He said on Friday.

So far, macroeconomic data for North America does not show a significant impact of the second wave of coronavirus. However, Europe could flash some warning signs, Shenfeld said.

“We can look across the pond to Europe, where even higher workloads look very likely to reduce Q4 GDP, for what could be reserved here if we can’t contain infection rates, ”he said. “When projecting economic data during the pandemic, it’s important to monitor coronavirus numbers, rather than just public health decrees. And, sadly, in Europe, the United States and most of Canada, the number of cases has yet to signal the end of the second wave. While the North American economy appears to have grown again in October, we are not out of the woods yet. ”

The impending winter and the surge in coronavirus cases raise the following point: the need for a fiscal stimulus.

Fed Chairman Jerome Powell highlighted this need Thursday at a press conference, which followed the monetary policy meeting that kept interest rates unchanged.

Powell recalled that the current economic downturn is the most severe and that it will take time to return to the levels of economic activity seen at the start of the year.

“It will take both monetary and fiscal policy to achieve this,” he said. “Additional support from fiscal and monetary policies will likely be needed. ”

Powell also addressed the rise in COVID-19 cases, saying the United States is seeing “a generalized spike in cases”, noting that “it seems likely that people who have started engaging in activity can opt out “.

Data to monitor

Next week will be a fairly light data week, with the critical releases being the US inflation data on Thursday and the PPI numbers on Friday.

In addition, markets will continue to monitor U.S. jobless claims, which are scheduled for release on Thursday.

Warning: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. It is not a solicitation to effect an exchange of commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept guilt for any loss and / or damage resulting from the use of this publication.


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