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James Hyerczyk
Gold

Gold futures are trading higher on Tuesday, supported by a plunge in the U.S. Dollar against a basket of major currencies as investors increase bets on a Joe Biden victory in today’s U.S. presidential election. Renewed interest in higher risk assets is also offsetting the impact of strict lockdowns across Europe.

With many professionals hedging the risks of the election in the Forex markets, it is my opinion that speculative money is moving into the gold market.

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At 12:31 GMT, December Comex gold is trading $1901.20, up $8.70 or +0.46%.

Dollar Tilts Toward Biden Win Heading into U.S. Election

Foreign exchange markets in Europe tilted on Tuesday towards pricing a victory for U.S. Democratic candidate Joe Biden against President Donald Trump despite warnings that possible post-election disputes could unleash weeks of dollar volatility.

Analysts believe a Biden win would weaken the dollar as the former vice-president is expected to spend big on stimulus and to take a freer approach to trade, boosting other currencies at the dollar’s expense.

There is also growing fear that the election may be compromised leading to legal action that could delay the transfer of power. Republican Trump, who is trailing Biden in national opinion polls, has criticized mail-in ballots and suggested he would deploy lawyers if states are still counting votes after Election Day on Tuesday.

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US Economic Data

Gold traders are looking forward to today’s economic reports after yesterday’s reported jump in manufacturing PMI. Today’s reports include Factory Orders and the IBD/TIPP Economic Optimism report.

Daily Forecast

Today’s price action indicates investors are betting on a Biden win so the surprise will probably be to the downside if Trump pulls off the victory.

The most bullish event for gold will be a Democratic sweep in the election that means the Democrats gain control of the Senate and the White House. This outcome will ensure Biden’s plans for potentially massive stimulus, which would support gold as a hedge against inflation and currency debasement. Essentially, the dollar would be crushed.

A Trump win could create two-sided volatility, however, gold’s upside potential could be limited.

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