Price of Gold Fundamental Daily Forecast – Gold Bulls Hoping for U.S. Political Gridlock

Gold futures are recovering from a one-week low hit earlier in the session on Wednesday as investors prepare for potential volatility and uncertainty stemming from the outcome of the U.S. mid-term elections. The early rally is also being underpinned by a weaker U.S. Dollar and falling U.S. Treasury yields. A firmer stock market may be capping gains in the gold market.

At 1125 GMT, December Comex Gold is trading $1235.90, up $9.60 or +0.79%.

The early price action suggests that gold traders are preparing for the possibility of a risk-off session in reaction to the Democrats taking control of the House of Representatives after Tuesday’s elections.

According to the political experts at CNBC, the “Democrats rode a wave of dissatisfaction with President Donald Trump to win control of the U.S. House of Representatives.”

They further added, “The win creates a clear hurdle for Republicans to easily pass legislation through both chambers of Congress, clouding the outlook for some of Trump’s key economic proposals.”

Forecast

The outcome of the election was predicted by many – the Democrats won the House and the Republicans retained control of the Senate – which is probably why we didn’t see volatility in stocks or gold. However, the news creates gridlock in the government and this creates uncertainty, which gold tends to feed off.

With the elections over, investors will shift their focus to the start of the U.S. Federal Reserve’s two-day meeting. Policymakers are not expected to raise its benchmark rate at this meeting, but could offer clues in its monetary policy statement that if plans on a December rate hike and perhaps as many as three more in 2019.

Clearly from the charts, gold is going to have to overtake $1250 with conviction to trigger an acceleration to the upside. On the downside, the key support is $1207.90.

The catalyst behind the price action today is likely to be the U.S. Dollar and U.S. interest rates. Gold is likely to remain underpinned if the dollar and rates continue to weaken.