The prices of gold rose today on renewed hopes that American lawmakers could reach a coronavirus aid deal before the November 3 election. This optimism pushed the dollar down to a one-month low and boosted the demand for the yellow metal, which is considered as a hedge against currency debasement and inflation.
Spot gold is currently trading at $1,919.48 per ounce as of 0824 GMT.
Yesterday, President Donald Trump indicated that he is willing to accept the $2.2 trillion COVID-19 relief package proposed by the Democrats despite the opposition from his own party. He acknowledged that not every Republican would agree with his decision, but they eventually will. Trump is expecting support specifically from Senate Majority Leader Mitch McConnell. But a senior Senate Republican aide revealed that McConnel privately told fellow Republicans that he does not favor a deal before the congressional and presidential elections. He fears that voting on a costly stimulus measure could be politically difficult for Republican senators seeking re-election in conservative states.
In an afterview with Democratic House Speaker Nancy Pelosi after a call with Treasury Secretary Steven Mnuchin, she said she is expecting the legislative package to be finalized by the end of this week.
DailyFx’s strategist Margaret Yang said gold’s recent rally was mainly due to the declining dollar. Gold is likely to complete its consolidation period in the near term and move towards an upward trend. She predicted that the yellow metal could reach $2,000 per ounce or higher by the end of 2020 because of uncertainties surrounding the COVID-91 pandemic and the U.S. presidential elections. The bullion also remains supported by low-interest rates and accommodative fiscal and monetary policies.
But IG Markets’ analyst Kyle Rodda commented that more certainty in the U.S. stimulus is needed before the market takes a position.
Meanwhile, customs data showed a decline in Switzerland’s gold exports in September. Export to China dropped from 10 tons in August to 1.5 tons in September and export to India fell from 20.2 tons to 5 tons. Gold exports to the U.S. also went down significantly for the second straight month in September.
On the technical front, Reuters’ technical analyst Wang Tao predicted that the bullion might test a resistance price level at $1,935 an ounce and a break from this level could push the metal towards $1,967.
In a related development, the holdings of the largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, dropped by 0.23% yesterday to 1,269.93 tons.