Economic and Political factors
With the upcoming U.S elections on November 3, the ongoing surge towards the stimulus agreement, and the increase of Covid-19 cases around the globe, the markets have seen substantial activity in the last few weeks. The affects of various political factors from around the world can be seen in the stock markets, especially, and gold has tried to hold its own in the United States as its steady, unchanged price contrasts the sharp declines in U.S equities. Gold is currently taking its cues from the U.S dollar and analysts have shifted their focus to the prospects surrounding the fiscal stimulus and not the presidential election itself says Louis Schoeman from Forexsuggest.com
However, despite the macro environment remaining substantially supportive in the hopes of higher prices on gold, this precious metal remains at the $1,900 per ounce level. The attention which would have been on the potential upside in gold is now being given to the stimulus in hopes of a Democratic win in the upcoming elections.
Investors are currently preparing themselves for four possible outcomes, namely either a Democratic sweep, a Trump win, a split Congress, or a contested election. Regardless of the outcome, analysists are predicting that either of the aforementioned scenarios are likely to trigger higher gold prices, but only in the long run. There is, however, the chance that one scenarios may set off an explosive rally while the other scenarios are bound to lead to gold experiencing a slow grind towards higher prices.
The most explosive scenario for gold could be what is known as a ‘blue wave’ should the Democratic candidate Joe Biden win the presidency resulting in the Senate falling under the control of the Democrats. However, when considered holistically, all roads are bound to lead to higher gold prices over a longer term.
Where the Covid-19 pandemic is concerned, the dollar is set to strengthen when considering that Europe is currently showing prevalent issues with the spread of the virus in what is being alleged and assumed to be the ‘second wave’ which has been anticipated for the past few months. According to Chris Weston, head of research for Pepperstone, one of the main reasons why the US Dollar shows substantial performance is due to the rest of the world showing decreases due to Covid-19 restrictions being slammed in place to curb the spread of the virus.
However, whether the US Dollar rises or not, gold traders can be assured that prices are set to rise again, and it may even mean that the US Dollar and gold will rally together to MMT in addition to deficit spending; an environment in which gold thrives.
While gold prices are seemingly stagnated at the present moment taking into consideration the developments in EU and US economies in addition to other factors, it would seem that the price on gold is poised for an upward lurch soon enough.
However, gold investors are kept at the edge of their seats in anticipation of election results merely a week away while keeping an eye on developments with the Covid-19 pandemic as more countries impose restrictions and economies buckle under the heavy weight as result.