Price of Gold Fundamental Daily Forecast – Rangebound Ahead of Tuesday’s Mid-Term Elections

Gold futures are trading mixed early Monday. Volume and volatility are light suggesting investor indifference ahead of Tuesday’s U.S. mid-term elections. Traders are expecting to see heightened volatility, but traders seem to be reluctant to take positions ahead of the results. The elections will determine whether the Republicans or Democrats gain control of Congress.

At 0809 GMT, December Comex Gold is trading $1234.00, up $0.70 or +0.06%.

To recap the events that drove the price action last week, during which time gold finished lower:

U.S. non-farm payrolls came in well above expectations while wages recorded their largest annual gain in 9-1/2, pointing to further labor market tightening that is likely to keep the Fed on-track for a December interest rate hike, it’s fourth this year.

Trade was a key issue last week especially on Friday. There was a report from Bloomberg which said President Trump had asked his cabinet to prepare documents for a trade deal. However, White House chief economic adviser Larry Kudlow said on Friday, that the U.S. and China weren’t even close to a deal to resolve their trade dispute.

In other news, hedge funds and money managers raised their net short position in gold by 18,723 contracts to 45,622 contracts, according to U.S. Commodity Futures Trading Commission data on Friday. This was the highest in three weeks.

Forecast

We’re not expecting much movement today as the major players are likely to sit on the sidelines ahead of the mid-term elections. The direction will continue to be controlled by the movement in the U.S. Dollar and the range in that currency is pretty tight.

The only report on Monday is the ISM Non-Manufacturing PMI. It is expected to come in at 59.3, down from 61.6.

If the Republicans control Congress after the mid-terms then look for continued weakness in gold. A Republican victory will be bullish for the economy and that means rising inflation and more Fed rate hikes. This should be bearish for gold.

Gold is likely to rally if the Democrats win because they tend to be anti-business. This could trigger a steep drop in the stock market which would likely make gold more attractive as a safe-haven asset.