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James Hyerczyk
Comex Gold

Gold futures posted their first weekly decline in three weeks, as fading chances of a U.S. stimulus package before the November 3 presidential election dented the dollar-denominated metal’s appeal as an inflation hedge, while increasing the appeal of the safe-haven U.S. Dollar.

While sentiment for gold remains bullish over the long-run, without a strong short-term catalyst, it looks like it is going to have trouble sustaining a rally. The short-term catalyst seems to be another fiscal stimulus aid package. Without the stimulus bill, gold prices could drift sideways to lower over the near-term.

Last week, December Comex gold futures settled at $1906.40, down $19.80 or -1.03%.

One thing we did learn late last week is that better than expected economic data could help support gold if it weakens the U.S. Dollar. On Friday, U.S. retail sales data came in better-than-expected, pressuring the greenback while underpinning gold. However, gold did give back some of those gains after U.S. industrial production fell more than expected.

As far as a financial aid deal is concerned, Democrats and Republicans seemed to agree on a U.S. stimulus deal before Election Day even as coronavirus cases continue to rise and a labor market recovery stalls.

The latest COVID-19 news reveals that fresh restrictions to combat COVID-19 have been introduced across Europe, and the U.S. Midwest is battling spikes in new cases, threatening to derail the country’s economic recovery from the coronavirus shock.

This news is potentially bullish for gold prices if it encourages U.S. policymakers to move faster toward passing a stimulus bill, but so far it hasn’t been able to appeal to their sense of urgency.

Weekly Forecast

Despite the lower weekly close, the sideways trade suggests gold investors are still anticipating a stimulus deal despite the current stalemate in Washington. However, they probably accepted that it won’t be coming before the November 3 election.

We’ve seen weakness, but we haven’t seen a price crash which probably means the longer-term bulls are buying on weakness or the dips. This further supports the notion that all it is going to take is a catalyst to trigger a breakout to the upside.

Investors are fairly certain the stimulus is coming. They just don’t know when or how big the financial aid package will be. If you’re a short-term trader, it may be a good idea to keep your powder dry until after the election. If you’re a long-term investor then continue to accumulate gold when it trades at a value area.

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

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