Gold had the biggest 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 over the past 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 some 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 to some notable profit-taking that started around $1,960.”
The market is looking at an increased likelihood 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 like to add gold into the portfolios, she said.
Fed chairman Jerome Powell opened the door to a possible shift in the central bank’s bond purchases in the coming months, saying that more fiscal and monetary support is needed. 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 US unemployment rate fell by more than expected in October, dropping to 6.9 per cent, according to a Labour Department report on Friday.
Spot gold rose 0.1 per cent to close at $1,951.35 an ounce, after gaining as much as 0.6 per cent. That extended this week’s gain to 3.9 per cent. The Bloomberg Dollar Spot Index declined 0.3 per cent.
In base metals, copper rose 1.4 per cent to settle at $6,946.50 per tonne in London, capping a weekly advance of 3.4 per cent. Zinc reversed an earlier loss to reach the highest since May 2019.
While a contested election ending with a divided government would be the least bullish of all possible outcomes for commodities markets, copper could still hit fresh highs next year on the back 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.”
