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Price of Gold Fundamental Daily Forecast – Are Bullish Investors Betting on a Democratic Win in Georgia?

By:
James Hyerczyk
Published: Jan 5, 2021, 12:48 UTC

Driving gold prices higher, in my opinion, are concerns that the spread of coronavirus will lead to further lockdowns and restrictions.

Comex Gold

In this article:

Gold futures are edging higher on Tuesday on increased bets for a Democratic victory in the Georgia runoff elections. That’s my opinion, because a win by the Democratic candidates will have a big influence on government policy this year including tax laws, infrastructure spending and fiscal stimulus. All of which will contribute to the widening U.S. national debt.

At 11:58 GMT, February Comex gold futures are trading $1954.20, up $7.60 or +0.39%.

Also driving gold prices higher, in my opinion, are concerns that the spread of coronavirus will lead to further lockdowns and restrictions that could threaten to derail the global recovery. In the same category, are worries over vaccinations especially in the United States where the process is not running as smoothly as predicted.

The country is falling well short of its vaccination goals, which means early predictions of a speedy economic recovery may have to be scrapped, opening up the possibility of another round of shutdowns and even more fiscal stimulus.

Gold traders are also watching the U.S. Dollar and demand for riskier assets, which are moving hand in hand. We saw yesterday that a plunge in the stock market will increase the dollar’s appeal as a safe-haven asset.

Investors Watching US Runoff Elections

In the United State, control of the Senate is at stake with Tuesday’s dual runoff elections in Georgia.

A Democratic victory in both races could tip control of the Senate away from Republicans, but both contests are very tight and the results may not be immediately known, which could lead to a repeat of the chaotic vote re-counts after the U.S. presidential election last year.

“2021 starts with a bang with pivotal political and economic news for markets to digest. The undisputed highlight will be the result of the Senate seat run-off elections in Georgia,” James Knightley, chief international economist at ING, wrote in a research memo.

“If the Democrats win both seats this should lead to the most substantial 2021 fiscal stimulus. Nonetheless, it could be the excuse for a near-term consolidation in risk markets after a strong post-election rally.”

Dollar Dips as Risk Currencies Get Boost from Yuan Fixing

The U.S. Dollar fell against a basket of major currencies on Tuesday after China lifted its official Yuan exchange rate to its highest level in 30 months, helping support demand for other currencies.

China’s central bank set the official Yuan midpoint at 6.4760 per dollar before the market opened, up from the previous fix, also the biggest change since 2005.

In the offshore market, the Yuan strengthened as far as 6.4419 for the first time since June 2018. It started the week at 6.4944.

“If the Chinese currency is going up, it’s providing a degree of support for Asian currencies in general, and I suspect that’s why the U.S. Dollar is partially reversing the gains that we saw from Wall Street time,” said Ray Attrill, head of FX strategy at National Australia Bank in Sydney.

Daily Forecast

If gold traders are betting on a Democratic win like I suspect then they could be in for a world of hurt if the Republicans are victorious. However, losses will be limited because the pandemic is not going to go away anytime soon and conditions are likely to continue to worsen with more major lockdowns likely. I think Biden will have to make that choice by March.

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

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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