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James Hyerczyk
Comex Gold

Gold futures are edging higher on Friday, as the U.S. Dollar weakened against the major currencies. The price action is likely being manipulated by end of the month position-squaring and position-trimming ahead of the weekend.

I see no evidence that the dollar’s rally has run its course, and I don’t think that investors suddenly made gold a safe-haven asset due to worries over soaring coronavirus cases in the United States and Europe as well as uncertainty over the upcoming U.S. presidential election, as some analysts have claimed.

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At 10:03 GMT, December Comex gold futures are trading $1874.00, up $6.00 or +0.32%.

Although stock market and Forex traders are bracing for volatility following the election on November 3, I don’t see gold traders preparing for volatile price swings. I think they are sitting in a good position because more fiscal stimulus is coming regardless of who wins the election.

I think gold traders would like to see Biden win, however, along with a sweep in the House and Senate by the Democrats because this would guarantee even bigger stimulus packages from the Biden administration in early 2021.

If Trump is re-elected, but Republicans lose the Senate then Trump is going to have a hard time getting anything accomplished during the next four years. Stimulus would probably be unaffected if we use the latest coronavirus-aid negotiations as our guide. With the Democrats controlling the House and the Senate, chances are House Speaker Nancy Pelosi will get her wish for a $2.2 trillion aid package versus the $1.8 trillion Republican bill.

US Economy

On Thursday, the government reported a big increase in U.S. Quarterly GDP. I wouldn’t put much stock in this number since it occurred during a time when fiscal stimulus was flowing through the economy. Since that reporting period, the stimulus has dried up and COVID-19 cases have risen. This can only be bullish for gold because it should just about ensure lower growth numbers this quarter, increasing the need for more fiscal stimulus.

Longer-term, the Fed has its hands tied, having committed to rates near zero until at least 2023. This should underpin the gold market for years.

So essentially, the gold market has enough monetary stimulus to sustain the rally, but it needs big fiscal stimulus to drive prices into the record highs we saw over the summer.

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

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