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James Hyerczyk
Comex Gold

Gold futures are up on Wednesday, hitting a fresh two-month high, as investors increased bets on a Democratic win in the U.S. Senate run-off races in Georgia, which would likely lead to additional fiscal stimulus.

Also supporting prices are concerns over the slow rollout of COVID-19 vaccinations in the United States and the possibility of further restrictions and lockdowns globally due to the rapidly spreading coronavirus variant.

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At 11:34 GMT, February Comex gold is trading $1954.00, down $0.40 or -0.02%.

Bullish Traders Betting on “Blue Sweep”

According to reports, Democratic challenger Raphael Warnock beat Republican incumbent Kelly Loeffler in one of two Senate races in the state, TV networks and Edison Research projected. Democratic challenger Jon Ossoff held a slim lead over Republican David Perdue in the other, with 98% of votes counted, according to Edison.

Along with a narrow majority for Democrats in the House of Representatives, a “blue sweep” of Congress could usher in larger fiscal stimulus and pave the way for President-elect Joe Biden to push through greater corporate regulation and higher taxes.

A Democrat-controlled Senate would be positive for economic growth globally and thus for most riskier assets, but negative for bonds and the dollar on the assumption the U.S. budget and trade deficits would swell even further.

The 10-year U.S. Treasuries yield rose above 1% for the first time since March, on expectations of larger government borrowing under a Senate split 50-50 with Vice President-elect Kamala Harris, as president of the upper chamber, becoming the tie-breaker.

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Daily Forecast

Besides the election results in Georgia, gold traders will have the opportunity to react to a number of U.S. reports that could have an impact on the U.S. Dollar and consequently gold prices. The reports include the ADP Non-Farm Employment Change, Final Services PMI, Factory Orders and the FOMC Meeting Minutes.

The minutes of the U.S. Federal Reserve’s December 15-16 policy meeting are due at 1900 GMT.

The Federal Reserve’s decision in December to leave its monthly bond purchases unchanged dismayed analysts and investors who thought the central bank should have expanded the program to better support the economy through the coronavirus pandemic.

The minutes of that meeting will be released Wednesday and are likely to detail just what drove that decision and how the Fed is factoring the promise of a coronavirus vaccine into its plans. Of greatest interest is any insight those minutes offer into what it would take for central bankers to shift monetary policy in coming months if widespread immunization triggers a stronger economic rebound.

The Fed might decide to unleash more monetary stimulus once it has a clearer picture on how the U.S. Congress turns out, said Howie Lee, an economist at OCBC Bank.

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