Gold dips as dollar favoured by tighter U.S. election race
The prices of gold fell today as President Donald Trump’s victory over his Democratic opponent Joe Biden in the battleground state of Florida boosted the U.S. dollar. The greenback rose 0.7% against a basket of rival currencies that made the bullion more expensive for investors using other currencies.
Spot gold is currently trading at $1,894.28 per ounce as of 0850 GMT.
Investors and traders were initially preparing for a Biden victory because they expect him to roll out a large fiscal stimulus package to boost economic recovery from the COVID-19 pandemic. But Trump won in Florida and led in other swing states. Despite this, Biden is confident that he would win the White House race by taking three crucial Rust Belt states.
Perpetual Ltd.’s head of investment strategy Matt Sherwood noted that the possibility of a clean sweep by the Democratic Party is diminishing by the minute. It reduces the likelihood of large stimulus measures expected to be finalized immediately at the start of Biden’s administration.
The unprecedented global stimulus packages released by governments worldwide to shield their economies from the impact of the pandemic boosted gold prices by around 25% so far this year.
IG Markets’ analyst Kyle Rodda said the gold market is beginning to doubt a clear victory by Biden and its effect has been the strengthening of the dollar. OANDA’s senior market analyst Jeffrey Halley added that the yellow metal is suffering because of Trump’s victory in Florida. He said the bullion has moved away from the resistance price level at $1,912 and predicted that it would trade in the $1,890-$1,920 range early in this session.
Whoever wins the U.S. presidential election will face the challenge of leading a nation strained by political polarization and racial tensions and ravaged by the pandemic that killed hundreds of thousands of people and left millions of Americans jobless.
Meanwhile, new orders for American-made products grew in September, but further gains might be limited. Consumer spending is likely to slow down as federal relief money for employers and employees impacted by the pandemic dries up.
Market participants will be monitoring the two-day policy meeting of the U.S. Federal Open Market Committee that will start later today. They will also be keeping an eye on the release of the ISM Non-Manufacturing Purchasing Managers’ Index (PMI) and the IHS Markit Services PMI in the U.S. for October.