Price of Gold Fundamental Daily Forecast – Traders Continue to Pin Hopes on Stimulus Deal Before Election

James Hyerczyk
·3 min read

And the whipsaw continues on Friday with gold futures prices edging higher, while turning slightly better for the week as comments from Washington suggest a fiscal stimulus package may still be possible before the November 3 election.

Gold is once again tracking higher for the day and week as investors pinned hopes on a U.S. coronavirus relief package eventually getting passed. The dollar-denominated asset is also being underpinned by a weaker U.S. Dollar, which is losing ground to the Euro, Canadian Dollar and Japanese Yen.

At 10:18 GMT, December Comex gold is trading $1911.30, up $6.70 or +0.35%.

Traders Waiting for Stimulus

The price action this week strongly indicates that gold traders are locked-in on the fiscal stimulus negotiations. Today’s support is being fueled by positively construed comments from House Speaker Nancy Pelosi on Thursday. They seem to be strong enough to offset President Trump’s negative statement about the Democrats’ negotiating skills on Wednesday.

After Thursday’s talks ended, Pelosi said negotiators were making progress in talks with the White House over the coronavirus fiscal aid package and a deal could be reached “pretty soon”.

Euro Zone Business Activity Shrinks; More ECB Stimulus Expected

Economic activity in the Euro Zone shrunk in October as coronavirus restrictions returned to the region, preliminary data showed on Friday.

The flash Euro Zone PMI Composite Output Index, which looks at activity in both manufacturing and services sectors, dropped to a four-month low in October to 49.4, versus 50.4 in September. A reading below 50 represents a contraction in activity.

The latest figures showed that manufacturing has remained somewhat resilient over the last month, but activity in services has fallen to a five-month low.

The latest numbers coincided with a period of new restrictions across the Euro Zone as it grapples with a second wave of coronavirus infections.

The challenges that the Euro Zone is facing in the wake of the pandemic are putting additional pressures on the European Central Bank (ECB). Economists believe that further monetary stimulus is on the way before the end of the year. More monetary policy stimulus from the ECB should be long-term bullish for gold.

Short-Term Outlook

Short-term gold buyers would like to see a fiscal stimulus package before the November presidential election. It won’t be bearish for gold, per se, because there is enough accommodative central bank policies out there to provide long-term support for the precious metal.

If a stimulus deal isn’t reached this weekend, then it won’t be the end of the world for gold bulls. It only means it’s going to come after the election. Traders will then shift their focus to the U.S. presidential election.

The polls seem to be leaning toward a Joe Biden win, but there is always uncertainty as we move closer to Election Day. However, in this case, I don’t think the uncertainty is going to change the outlook for gold very much with most investors locked-in to the idea of more stimulus either before or after the election.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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