Price of Gold Fundamental Daily Forecast – Little Short-Term Demand Without Fiscal Stimulus

Gold is trading flat on Monday after giving back earlier gains. Shortly after the opening, the market jumped to its highest level in three weeks, but sellers stopped the move as the U.S. Dollar recovered some ground.

The market is being supported by the prospect of more U.S. coronavirus relief spending and increased bets that a win by Democratic candidate Joe Biden would likely lead to an even bigger stimulus package next year. Helping to put a lid on prices is demand for the U.S. Dollar as some investors fear that fiscal stimulus negotiations are poised to remain in stalemate.

At 11:29 GMT, December Comex gold futures are trading $1928.00, up $1.80 or +0.09%.

The price action suggests that short-term buyers want to see the stimulus now, but long-term traders are content with waiting for it to come later. Essentially, gold traders are facing a “win-win” situation.

Stimulus Negotiations at an Impasse

Traders are still holding out hope for some sort of stimulus even as chances for another round before the election appeared to dim over the weekend. Both House Speaker Nancy Pelosi, and Senate Republicans pushed back on a $1.8 trillion offer from the White House.

In a letter to colleagues, Pelosi highlighted what she said were insufficient offers on healthcare issues.

“The news is filled with the numbers in terms of dollars. The heart of the matter is:  can we allow the virus to rage on and ignore science as the Administration proposes, or will they accept the scientific strategic plan in the Heroes Act to crush the virus,” Pelosi said, referring to a bill that Democrats already passed in the House.

Meanwhile, Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows called for a separate vote on the Paycheck Protection Program in their own letter to Congress on Sunday.

The Trump administration on Sunday called on Congress to pass a stripped-down coronavirus relief bill using leftover funds, as negotiations on a broader package stalled ahead of the November 3 presidential election.

Daily Forecast

The early price action suggests traders may be taking a wait-and-see approach on Monday. They may be looking for further developments on the stimulus, while continuing to assess the chances of Joe Biden winning the presidential election.

Short-term, we may be willing to accept a dip in prices if there is a stalemate over the financial aid, because we believe the stimulus is still coming, but after the election.