International spot gold on Thursday (October 8) fluctuated, reaching a peak of $1,900.30 an ounce before losing ground, once again showing that gold bulls have been unable to gain effective upward momentum in the face of the impasse over the massive stimulus bill. With gold still hovering just below the crucial $1,900 mark, the dollar’s decline is almost the only driver of gold’s rise. Gold, meanwhile, has seen a technical “death cross” that seems to presage further declines. Investors are waiting for more data to bring more dynamics to the market, while the focus remains on the size and implementation of the U.S. stimulus bill.
While President Donald Trump voluntarily signaled his intention to offer a smaller aid package yesterday, House Speaker Nancy Pelosi said there would be no separate airline aid bill without a bigger aid package. That has kept risk sentiment in check, with the dollar gaining some support and again limiting gold’s room for a rebound.
Still, polls show Mr. Biden’s lead widening, raising investors’ hopes of a larger Democratic stimulus after the election. Schroders investment strategist Sean Markowicz said the market was increasingly expecting Democrats to take control of both houses, which would be good for the stimulus bill. If the election were held now, Biden would win 279 electoral college votes to Trump’s 125, according to a Financial Times poll tracking.
On the economic front, new U.S. claims for jobless benefits rose to 840,000 in the week to October 3, compared with economists’ expectations of 820,000, but did not produce much of a surprise. Experts saw the data as a sign that corporate America as a whole is still shedding jobs, even as some companies hire more workers.
That number is still too high, said Diane Swonk, chief economist at Grant Thornton. California still suspends processing of data errors. Applications for special epidemic assistance have declined, but the overall level remains high. The long-term unemployed must apply repeatedly for the benefits, which expire at the end of the year. There are still a lot of questions in the data, but it’s still going to be very difficult to get back to normal.
On a technical daily chart, gold remains below its downtrend since August 7 (the current cut is around 1918) and needs to break above this line to further reverse its August weakness. If stabilize above 1921 level, it is expected to push the price to 1950-1970 area to launch an impact.
However, failure to break the 1900 level or the above trend line would encourage bears to fall back to 1872 or even 1850 again. Notably, a bearish “death cross” has been forming since the end of September, with the 20-day moving below the 50-day moving average.
Edward Moya, senior market analyst at Oanda, said gold needs a boost from both fiscal and monetary policy. Zaner Metals said short-term traders were ready to sell at high levels in the event of any stimulus deal, and could choose to do so once gold recovered to $1,923 a Troy ounce, its August peak and a downward resistance line.
Standard Chartered said in a research note that democratic candidate Joe Biden, if elected, would be a big boost for gold. “This will be the biggest boost to gold’s upward trend for the rest of the year, and with Biden ahead in the polls, none of this is fully priced in.”