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Precious Metals Gain as Investors Turn Cautious Ahead of US Election Results

Dollar weakens versus all major peers over US election woes resulting precious metals gaining upper hand.
Colin First

Gold came off a one-week low to trade higher on Wednesday as investors sought cover from market volatility and uncertainty surrounding the fallout of U.S. mid-term elections results. The specter of a Democrat-controlled House suggests that we will see a little bit of risk-off in the market, which should probably benefit gold in parts. Democrats rode a wave of dissatisfaction with President Donald Trump to win control of the U.S. House of Representatives.

The win creates a clear hurdle for Republicans to easily pass legislation through both chambers of Congress, clouding the outlook for some of Trump’s key economic proposals. Street stock futures and Asian shares lost steam after Democrats started gaining a majority, while the dollar weakened against most of its major counterparts, helping the bullion’s appeal among holders of other currencies.

Yellow Metal Moves Up As Investors Divert Funds From Risky Assets To Avoid Uncertainty Over US Election Results

As of writing this article, Spot gold XAUUSD is trading at $1232.95 an ounce up by 0.49% on the day, while US gold futures GCcv1 is trading at $1234.70 up by 0.68% on the day. Investors are also on the lookout for a two-day meeting of the Federal Reserve starting later in the day to gauge the outlook for U.S. monetary policy.

Fed policymakers are not expected to raise key rates, but traders are waiting to see whether they offer clues about possible rate increases in December and in 2019 and a hawkish forward guidance could help US Greenback limit downside move triggered by  US election results. All USD denominated pair are expected to face a high level of volatility across today’s entire trading session owing to fed meet and US election results. Spot Silver XAGUSD is currently trading at $14.70 an ounce up by 1.15% on the day.

Crude oil futures traded lower in mid-morning trade in Asia Wednesday after the Energy Information Administration said that US oil production was expected to rise in 2019. The higher inventory reported by the American Petroleum Institute coupled with comments by the Nigerian oil minister on expected growth in production kept a lid on prices. The API said U.S. crude stockpiles expanded by 7.83 million barrels last week, representing the biggest build in five weeks, compared with an average 2 million-barrel increase in a Bloomberg survey.

If EIA (Energy Information Administration) confirms this build, it could certainly lead to further price weakness. Oil prices were under pressure this week after Washington re-imposed sanctions against Iran’s oil exports, but granted waivers to eight importers, including China, India, South Korea, Japan, Italy, Greece, Taiwan, and Turkey, to allow them to continue buying from the Islamic Republic “temporarily”. Spot US Crude oil WTIUSD is currently trading at $62.33 per barrel up by 1.02% on the day.

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