Gold hit by steady dollar, fading U.S. stimulus hopes
• Gold prices dipped on Thursday as the dollar steadied and comments from U.S. Treasury Secretary Steve Mnuchin dashed hopes of a new fiscal stimulus package before the presidential election.
• Spot gold fell 0.2% to $1,896.26 per ounce by 0320 GMT, after rising as much as 1.1% in the previous session.
• U.S. gold futures were down 0.4% to $1,899.
• “The (gold) market is still treading water waiting for further clarity on what stimulus package may be needed in the U.S.,” said Cameron Alexander, manager of precious metals research at Refinitiv Metals Research.
“Gold will rise once the details of a possible stimulus package become available, but that may not happen for a while.”
• Mnuchin said he and House of Representatives Speaker Nancy Pelosi were “far apart” on another coronavirus economic relief package, and that a deal would be hard to reach before the Nov. 3 election.
• The dollar index was up 0.1% against rivals, drawing support from rising coronavirus cases and scant progress towards the stimulus deal.
• Gold, considered a hedge against inflation and currency debasement, has climbed 25% this year amid the unprecedented levels of global stimulus to ease the economic blow from the pandemic.
• “Gold should resume its longer-term rally after the election into the end of the year,” said Jeffrey Halley, a senior market analyst at OANDA, adding the metal was likely to trade between $1,880 and $1,920 in the near-term.
• Fueling further concerns about an economic recovery, some European nations are closing schools, cancelling surgery and enlisting student medics as Covid-19 cases surge.
· Gold to see more investment demand after the election: TD Securities
Investment appetite for gold is not waning, but low physical demand out of China and India requires a lot of offsets, according to TD Securities commodify strategists say.
It is expected that investment demand will pick up after the election, the strategists note.
"Investment appetite for gold will continue to rise, particularly in the period that follows the U.S. election. In fact, we reiterate that the long gold trade is likely agnostic to the election outcome — and gold bugs need not look too far on the horizon to expect a large-scale fiscal deal that could de-bottleneck the ongoing real rate suppression."
Both of the presidential candidates provide tailwinds for long gold trade.
· At $1,900 gold is still cheap - former Bear Stearns analyst
The gold market continues to struggle for direction as prices hover around $1,900; however, one market strategist continues to see upside potential as the market remains undervalued compared to other assets.
Many analysts expect gold prices to end the year back above $2,000 an ounce as central banks look to maintain the extraordinarily loose monetary policies for the foreseeable future.
The Federal Reserve is expected to keep interest rates at the zero-bound level through 2023.
Along with low interest rates, commodity analysts and economists expect to see inflation pressures rise, which could push real interest rates into negative territory, creating the perfect environment for gold.
• Silver fell 0.9% to $24.07 per ounce, platinum was flat at $857.04, and palladium eased 0.2% to $2,340.06.
Reference: CNBC, Kitco
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