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James Hyerczyk
Comex Gold

Gold futures are trading higher on Monday as investors react to a weaker U.S. Dollar and a rise in demand for higher risk assets. We’re not going to try to read into the move, but we suspect it’s tied to position-squaring ahead of Tuesday U.S. presidential elections since there were no major events over the weekend.

At 12:30 GMT, December Comex gold is trading $1892.10, up $12.20 or +0.65%.

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Downturn in US Dollar Driving Price Action

Earlier in the session, dollar-denominated gold was pressured by firmer demand for the safe-haven U.S. Dollar and Japanese Yen as tensions grew before Tuesday’s presidential election.

The reversal in the price action came as no surprise as expected swings in the major currencies climbed to their highest since April as investors waited for the outcome of an election that will have serious implications for the dollar’s outlook over the coming months.

“Volatility is rising because liquidity for hedges around the election is very thin. Everyone’s the same way, there’s no one selling this stuff thinking everything’s great,” said Jordan Rochester, Forex analyst at Nomura. Generally, traders are hedging for a decline by the Euro and a rise by the dollar. This move would be bearish for gold prices.


Election Impact

According to the latest headlines, Democratic challenger Joe Biden leads in national opinion polls, but the race looks close enough in battleground states that President Donald Trump could win the 270 Electoral College votes needed to win.

A Biden win would probably hurt the dollar, on expectations of a large fiscal stimulus package. A surprise Trump victory could stoke widespread uncertainty in the short term. This suggests that a Biden victory would be bullish for gold prices.

Daily Forecast

Short-covering or position-squaring is probably driving the gold market higher, but it is possible that aggressive bullish traders are buying in anticipation of a Joe Biden win.

Gains could be limited if investors renew their interest in the U.S. Dollar especially against the Euro. The dollar could continue to benefit from the deteriorating outlook for growth in Europe.

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

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