Gold: A clean sweep for Biden and Dems to trigger a rally
|Rising coronavirus cases and election uncertainty have hit gold. The fate of the precious metal hinges on the elections, yet surprise stimulus from central banks could also move XAU/USD, FXStreet's Analyst Yohay Elam reports.
Key quotes
“Gold heavily depends on the election results – for the White House and very much the Senate. Opinion polls are pointing to a handy victory for Biden over Trump. However, Trump may not necessarily accept the outcome and that could cause chaos that would drag markets down and gold with it. Yet even assuming Biden wins, the path higher for gold would be clearer with a blue wave – flipping the Senate.”
“A unified Democratic government would implement a generous, perhaps $3 trillion stimulus package and boost the precious metal. If Biden replaces Trump, but Republicans hold onto the Senate, they could limit the next support package to under $1 trillion. The middle way would be a victory for Trump – he would be able to force the GOP to compromise, citing a fresh mandate.”
“The Federal Reserve decision could also impact markets this time on Thursday. The Fed is set to leave its policy unchanged and not rock the boat two days after the elections. However, any hint of new bond-buying – to stem the uncertainty resulting from covid – would boost gold. Rejecting any new changes could weigh on it.”
“The Bank of England's rate decision is also worth mentioning. While the BoE has less impact on commodities, it could boost XAU/USD if it surprises by announcing negative interest rates already now. However, the London-based institution has been contemplating the idea for many months. Without signaling, it is imminent.”
“The US Nonfarm Payrolls report – and its full buildup – may help the precious metal if they disappoint, yet expectations are upbeat. Economists foresee an increase of 850,000 jobs in October, higher than 661,000 in September. In any case, labor statistics play third-fiddle in a week in which the Fed needs to compete for attention against the Fed.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.