Price of Gold Fundamental Daily Forecast – Rangebound as Fiscal Stimulus Deadline Looms

Gold futures are edging lower on Tuesday taking out yesterday’s low in the process as the rangebound market continues to be held hostage by Washington policymakers’ inability to come to an agreement as to the size and timing of the next U.S. fiscal stimulus package.

So far this week, the market is hovering just above the psychological $1900 level as caution spreads ahead of a deadline for agreement on a new U.S. coronavirus stimulus package and next month’s presidential election.

At 07:06 GMT, December Comex gold is trading $1905.60, down $6.10 or -0.32%.

The lingering choppy, two-sided trade in gold is really a reflection of the problem in the U.S. where politicians are putting their party platforms ahead of the needs of the people.

Gold is being supported by the hope of a stimulus deal ahead of the presidential elections on November 3, but some traders are starting to dispel that thought, while stating that a fresh round of U.S. fiscal stimulus is likelier to be a post-election event.

Then there’s the truth issue. Are we actually being told the truth about the negotiations – a couple of million here, a couple of million there? What’s the difference?

President Trump doesn’t seem to care about the stimulus. Two weeks ago, he called for an end of the negotiations and for Republican Senators to focus on the affirmation of his Supreme Court nominee. He then came back later with suggestions to piecemeal the package.

Trump is focused on his reelection campaign, seemingly conceding that the money won’t be in the hands of voters before the election. Furthermore, if he loses the election then what difference does it make to him if people get additional stimulus measures.

Besides, post-election stimulus is not guaranteed either because the Democrats are likely to save their bullets for an even bigger stimulus package in 2021.

Short-Term Outlook

Let’s start by saying I believe the longer-term up trend is fully supported, but the short-term outlook is very shaky due to the lack of clarity from Washington.

We may see some heightened volatility on Tuesday because after all, it is the deadline set by House Speaker Pelosi.

Pelosi and Treasury Secretary Steve Mnuchin “continued to narrow their differences” about the package, her spokesman Drew Hammill said.

Pelosi hopes that by the end of Tuesday there will be “clarity” on whether a stimulus bill can be passed before the November 3 election, he wrote on Twitter.

I think there are too many variables out there to produce a major rally in gold if a stimulus deal is made. How big will it be? When will the money be distributed? But we’re likely to see a knee-jerk rally if the U.S. Dollar falls on the news.

I believe that gold’s downside will be limited if there is no deal and negotiations are called off. This is because investors will be counting on a new fiscal deal after the election.

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