Gold futures are trading lower on Tuesday but hovering near a two-week high as traders assess the impact of President Trump’s contraction of COVID-19 on his re-election chances and react to rising hopes for a new coronavirus stimulus package. Meanwhile, a slightly weaker U.S. Dollar is helping to underpin prices.
At 09:48 GMT, December Comex gold is trading $1919.00, down $1.10 or -0.06%.
Currently, increasing risk appetite is acting like a double-edged sword with gains in the stock market capping gold prices, but dampening the safe-haven appeal of the U.S. Dollar, which usually drives up foreign demand for dollar-denominated gold. Nonetheless, the direction of gold over the short-run will ultimately be decided by the direction of the greenback.
Overnight, Asian shares rose to a two-week high after the U.S. president returned to the White House from the hospital following treatment for COVID-19 and on rising prospects for a fresh U.S. stimulus package. However, the severity of Trump’s illness has been the subject of intense speculation.
Doctors not involved in treating President Donald Trump for COVID-19 said the fact that he has been started on dexamethasone – a generic steroid widely used in other diseases to reduce inflammation – is the strongest evidence yet that his case may be severe.
I mention this not as a criticism, but rather as an alert to gold traders to have a trading plan just in case Trump has a relapse. This coincides with comments by his doctor that he’s “not out of the woods yet”.
On the bullish front, U.S. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin were preparing to continue talks on the new coronavirus relief package again on Tuesday. A new stimulus package is needed to keep the gold market afloat. Without this issue remaining at the forefront, gold prices would probably be a lot lower.
Hopes for a U.S. stimulus package to counter the economic impacts of the pandemic is what is propping up prices at this time. White House Chief of Staff Meadows said there was still potential to reach an agreement with U.S. lawmakers on more economic relief during the coronavirus pandemic.
Finally, Democratic candidate Joe Biden has widened his lead over Trump according to most election polls. This is actually good for gold because if elected, he is expected to open up the cash register and make more stimulus available since it looks as if the pandemic is likely to continue well into next year.
The bullish factors for gold are lining up but so far they’ve only been able to provide support. The market is still searching for that one event that could spike prices sharply higher.
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