Gold Weekly Forecast: XAU/USD (mostly) hinges on Trump´s electoral chances

Gold has been battling the $1,900 level amid fiscal stimulus speculation.
Pre-election polls and US GDP stand out in the upcoming week.
Late October's daily chart is showing a triangle pattern.
The FX Poll is painting a decisively bullish picture.

"Putting pen to paper" – such commentary from Washington about a fiscal stimulus deal has been pushing gold prices higher, while pessimism about a deal held it back. With time running out toward Election Day, the next bout of cash to fuel gold prices mostly depends on the outcome.

This week in XAU/USD: Stimulus speculation

When President Donald Trump completed his U-turn – from cutting off talks with Democrats to stating he wants a larger deal than them, gold advanced. The same happened when House Speaker Nancy Pelosi expressed optimism about striking an accord.

However, XAU/USD struggled after reports suggested that Senate Majority Leader Mitch McConnell advised the White House not to opt for a deal. The clock is ticking down to the Elections on November 3, and markets are becoming skeptical that a multi-trillion deal could be passed through Congress.

Apart from funds injection from Uncle Sam, gold seemed to ignore Chinese Gross Domestic Product figures. The world's second-largest economy grew at an annualized pace of 4.9% – a rapid pace but below expectations. Moreover, the GDP figure probably not enough to prompt more Beijing stimuli, thus insufficient to boost the precious metal.

Next week in Gold

The last full trading week before the US elections will likely put the spotlight on opinion polls. Challenger Joe Biden is leading the polls, but his victory is far from guaranteed. Moreover, the race for the Senate is much closer.

Biden has a considerable lead, yet narrowing:

Source: RealClearPolitics

The best-case scenario for gold is that Biden and Democrats win full control – thus enabling them to approve a generous stimulus bill – positive for XAU/USD. If Trump wins and Republicans hold onto the Senate, there is still a good chance of a significant relief package, albeit somewhat smaller.

The worst-case scenario for the yellow metal is a Biden victory with a split Congress, an outcome that could paralyze Washington and potentially result in a minimal package. Senate polls are no less important than those for the presidency.

Source: FiveThirtyEight

The first release of US Gross Domestic Product for the third quarter is forecast to show a substantial rebound after crashing in the previous period. An annualized increase of over 30% is expected. If GDP beats estimates, it could diminish the size of the relief package, while a miss could increase it.

The European Central Bank's rate decision is also set to move gold. Coronavirus cases are surging in the old continent, and several governments have imposed restrictions on activity and movement.

The ECB deployed its Pandemic Emergency Purchase Program (PEPP) in the peak of the first wave, and could now open the door to printing more money. If Christine Lagarde, the bank's president, hints at more action, gold could shine.

Here are the key events for gold on the economic calendar:

Overall, the precious metal is set to react positively to additional monetary and fiscal stimulus and retreat in their absence.

XAU/USD technical analysis

Gold is trading within a narrowing wedge or triangle. According to technical textbooks, this pattern of near-symmetrical lower highs and higher lows implies a significant move is coming once the price of a troy ounce breaks above these barriers.

Where will XAU/USD go? It is trading above the 100 and 200-day Simple Moving Averages but has failed to break above the 50-day SMA. Momentum is marginal to the upside.

Critical resistance awaits at $1,933, which has capped the price twice in October. A break above this level would free gold of downtrend support and the 50-day SMA. The next level to watch is $1,975. which held the metal down in September. Further above, $1,995 and $2,020 await XAU/USD.

Support awaits at $1,898, a support line in mid-October, followed by $1,875, a stepping stone on the way up earlier in the month. The next level to watch is $1,850, the low point in September.

Gold sentiment

While election uncertainty is set to increase, gold has a chance of a break to the upside – due to technicals and perhaps a push from the ECB.

The FX Poll is pointing to bullishness on all timeframes, with ascending price targets. Do experts foresee massive fiscal and monetary stimulus?

Related Reads

Share: Feed news

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. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.