Gold price rises as Biden closes in on White House
07 November, 2020
Gold had the largest weekly gain since July and copper rose as Joe Biden tightened his grip on the race for the White House, while investors also weighed up prospects for further Federal Reserve stimulus.
Bullion broke out of a narrow trading range seen in the last month as uncertainty over the US election and renewed stimulus hopes boosted demand for the safe-haven metal. Democrat Joe Biden has taken the lead in Pennsylvania over President Donald Trump, putting him on the cusp of victory in the presidential race.
Bullion gave up a number of the early advances as “stocks have come off highs and the dollar is making a modest comeback”, said Tai Wong, head of metals derivatives trading at BMO Capital Markets.
“There also seems for some notable profit-taking that started around $1,960.”
The marketplace is looking at an elevated probability of a Biden victory, and a stimulus package - albeit rather a modest one compared to a blue wave scenario - might be still in the horizon, according to Wenyu Yao, senior commodities strategist at ING Bank.
With the Fed to stand behind the curve, given its new average-inflation targeting framework, this is leading to low or lower real rates. Investors would still prefer to add gold in to the portfolios, she said.
Fed chairman Jerome Powell opened the entranceway to a possible shift in the central bank’s bond purchases in the coming months, saying that more fiscal and monetary support is necessary. The Fed kept its stimulus steady at its meeting this week, but a Republican Senate hamstringing government aid efforts may force it to step up and fill the gap soon.
THE UNITED STATES unemployment rate fell by a lot more than expected in October, dropping to 6.9 %, according to a Labour Department report on Friday.
Spot gold rose 0.1 % to close at $1,951.35 an ounce, after gaining up to 0.6 %. That extended this week’s gain to 3.9 per cent. The Bloomberg Dollar Spot Index declined 0.3 %.
In base metals, copper rose 1.4 % to stay at $6,946.50 per tonne in London, capping a weekly advance of 3.4 %. Zinc reversed a youthful loss to reach the best since May 2019.
While a contested election ending with a divided government will be the least bullish of all possible outcomes for commodities markets, copper could still hit fresh highs next year on the trunk of faltering supply and robust demand, Morgan Stanley analysts Susan Bates and Marius van Straaten said in a note.
“Once initial volatility has passed, we expect increased focus on the market fundamentals, which remain broadly supportive for base metals,” the analysts wrote. “Copper still features the strongest fundamentals on a tepid supply growth outlook through 2021.”
Source: www.thenationalnews.com