Gold steadies as traders brace for US presidential election outcome uncertainty
NEW YORK (November 5) Gold (XAU/USD) continues to backslide from its record high, eventually finding support at $2,724 early on Tuesday and bouncing back to regain the $2,740s. A marginally weaker US Dollar (USD) due to uncertainty over the US presidential election result is aiding Gold in its rebound, since the precious metal is mostly priced and traded in USD.
This comes as markets increasingly view the final result of the election as polarizing for the US currency, with a victory for Republican nominee Donald Trump USD-bullish but the opposite for Democrat nominee Kamala Harris.
Simmering tensions in the Middle East also keep Gold supported, after Iran's supreme leader, Ayatollah Ali Khamenei, said that the US and Israel "will definitely receive a crushing response," to Israel’s attack last month. Further, overweight long-positioning from trend-following hedge funds is also helping the yellow metal sustain its current highs.
Gold rises ahead of US presidential election result
Gold rises from safety flows due to the high level of uncertainty regarding the outcome of the US presidential election, which regardless of the winner alone can be bullish for the yellow metal.
“Regardless of the outcome, significant political shifts can unsettle financial markets, and such uncertainty typically fuels volatility, and both can serve as catalysts for higher Gold prices,” says Matthew Jones, precious metals analyst at Solomon Global.
The highly-rated election forecaster 538.com indicates a 50% probability of Vice President Harris winning on Tuesday whilst former President Donald Trump has a 49% chance of victory. That leaves a 1% chance of no overall winner. Over the last 24 hours, Harris has edged into the lead after lagging Trump for several days. This may also explain Gold’s turnaround on Tuesday.
Solomon’s Jones is bullish on Gold overall, seeing the election outcome as a “win-win” for the precious metal regardless of which candidate is victorious.
A Trump in the White House would lead to “inflationary pressures and geopolitical tensions,” according to the analyst, which could, “amplify Gold’s appeal as a safe-haven asset, driving demand upward.”
On the other hand, if Harris wins, the Democrat nominee “has outlined a vision marked by robust government expenditure on social programs, infrastructure, and climate initiatives,” writes Jones, adding that these policies “may exacerbate budget deficits, potentially weakening the (US) Dollar and stoking inflation fears. Investors could increasingly turn to Gold as a hedge (...) pushing prices higher.”
FXStreet
