Gold climbed at the start of a crucial week that brings the US presidential election and a Federal Reserve policy meeting - events set to dictate the trajectory of the dollar, the precious metal and appetite for risk.
Bullion was up for a second session, with Democratic nominee Joe Biden’s chances of winning the Electoral College rising to a record high 90 per cent, according to the latest run of poll aggregator FiveThirtyEight’s election forecasting model, although some state races are still extremely close.
“The possibility of post-election turmoil and a contested outcome represents a significant risk in our view, and one that could prove quite gold-positive in the most extreme scenarios,” according to RBC Capital Markets.
Gold has given up ground during the presidential race’s closing stages, dropping for a third straight month in October, the longest losing run for the traditional haven since April 2019. Still, while prices have pulled back from the record set in August, holdings in bullion-backed exchange-traded funds remain close to an all-time high as investors track the US contest, the course of the coronavirus pandemic, and central bank action.
Meanwhile, large swathes of Europe will enter lockdown this week as governments concluded tougher action is needed to counter the pandemic. Global fatalities topped 1.2 million, after the deadliest week for the outbreak since April.
Global markets are priced at a pivot point, with real rates climbing as nominal rates rise and breakevens struggle to firm amid a second wave of the coronavirus, TD Securities analysts led by Bart Melek said in a note. Precious metals have broadly remained contained to their multi-month range for the time being, according to the analysts.
“As uncertainty fades going forward, we expect that investment demand will continue to grow in the months ahead, lifting gold prices as real rates resume their downward trajectory,” according to TD Securities.
Spot gold advanced 0.7 per cent to $1,892.17 an ounce at 10.55am New York time, extending Friday’s 0.6 per cent gain. Silver climbed 0.8 per cent, while platinum and palladium also rose. The Bloomberg Dollar Spot Index was 0.1 per cent higher after rising 1.2 per cent last week.
The Federal Open Market Committee meets on November 4 to 5. The Fed won’t increase the pace of its asset purchases this year or next, and wouldn’t meaningfully boost the US economy even if it did, according to most economists surveyed by Bloomberg ahead of this week’s gathering.
