Biden Victory to the Rescue
While on-going stimulus negotiations will be a good thing for gold if they keep the pressure on the U.S. Dollar, gold bulls may actually have an ace up their sleeve, and that ace is Democratic candidate Joe Biden.
According to reports late last week, the dollar weakened and gold rallied as expectations grew that Joe Biden would win the U.S. presidency and offer fiscal stimulus after the elections.
Additionally, several Wall Street banks forecast a stimulus package no matter which candidate wins, but say that a Biden presidency, if Democrats also retake control of the Senate, would be likely to result in a bigger one. UBS Asset Management, for example, is assigning a 75% probability of a Biden win.
“Besides possibly losing the presidency, Republicans may also lose control of the Senate as betting odds are giving Democrats a near 70% chance of taking the Senate,” Brown Brothers Harriman strategists said.
Gold is likely to be underpinned over the next three weeks leading into the election because the polls show Biden holding a comfortable lead over Trump. As we said before, a Biden victory and a Democratic sweep will likely lead to an even bigger stimulus package next year.
But if traders think the market will spike higher over the short-run, they are going to have to get some help from a stimulus deal, and that could be tough.
According to reports on Sunday, chances for another round of stimulus before the election appeared to dim over the weekend, as both House Speaker Nancy Pelosi and Senate Republicans pushed back on a $1.8 trillion offer from the White House.
I see a mostly sideways-to-firm trade if the stimulus talks continue, but if both parties announce an end to the talks then look for gold prices to weaken, but not necessarily fall below the recent bottom at $1851.00.
For a look at all of today’s economic events, check out our economic calendar.