Gold continued to trade in a tight range on Tuesday, hitting an intraday high of $1,912.06 an ounce before paring gains again, in a sign of nervousness as the market awaits negotiations on the U.S. fiscal stimulus bill. Gold is expected to remain volatile ahead of the outcome of the talks is likely to remain volatile. The latest news that Speaker of the Us House of Representatives Nancy Pelosi and US Treasury Secretary Steven Mnuchin will speak at 3 pm local time today (3 am Beijing time on Tuesday) may set off a new round of volatility in the gold price.
Investors were hoping a last-minute deal could be reached and Yesterday Ms. Pelosi said the gap between the two parties was narrowing. “Finally, they have also come to the table and we will try to reach some sort of agreement.” Mr. Trump has recently fanned the flames of that hope, saying in an interview with Fox News that he wants to strike a huge deal and will personally persuade his opponents on his side. “I want a bigger stimulus than the Democrats. Not every Republican agrees with me, but they will.” But there were conflicting messages from National Economic Adviser Greg Kudlow, who said Trump wanted a stimulus deal, but in “key areas.”
So for now, some analysts remain skeptical of a last-minute deal. “A last-minute agreement is highly likely, as the market seems to be hoping for, but the recent lack of progress in the discussions underscores the clear risk that no agreement will be reached,” ANZ Research said in a note to clients.
With risk aversion priced in and investors cautious ahead of the election, the only thing that could provide gold with momentum is a massive fiscal stimulus bill, which would effectively boost gold’s performance as a hedge against inflation.
If there are clear signs that additional fiscal support is unlikely in the near term, analysts said, they expect the optimism to fade and return to the volatility of the previous session. That will also weigh on gold prices. On the gold front, long positions in COMEX gold fell to 120,000 lots in the week ended October 13, CFTC data showed, the lowest level since June 2019. Short interest rose to 53,000 lots, or 21 per cent, the highest level since mid-2019.
On the other hand, the prospects for the economies of all countries as the epidemic continues to develop are still worrying. Michael Muller, mayor of Berlin, said at a press conference that the coVID-19 situation in the German city was a cause for concern and there were not many measures that could be taken beyond the imposition of a blockade.
According to Balram Bhargava, director of the Indian Medical Research Council (ICMR), several studies have shown that antibodies produced after infection with COVID-19 can last up to five months, but people can re-infect themselves if the antibodies disappear completely from the body. Authoritative research results show that the average patient from the initial infection to antibody depletion of the time is generally 100 days.
Technically, gold’s modest recovery is struggling around a resistance range of 1911.44-1928.82, which is a combination of forwarding support and a downtrend line since mid-August. Short-term support focus 1848.66-1863.27, if the day closing below this range may open the door to explore 1800 lines; If the above-mentioned resistance is broken, it is expected to re-explore the 2000 mark.
“The lack of stimulus is worrying news, exacerbated by the worsening of the epidemic and pre-election uncertainty,” said Mona Mahajan, U.S. investment strategist at Allianz Global Investors. There is a reasonable possibility that if there is no stimulus before the election, then there will be after whoever wins. As cases [of coVID-19] spike again, stimulus measures will be important.”
Phillip Futures said in a note that long-term investors are already turning their attention to what the November election will mean for subsequent U.S. stimulus policies. “If the Democrats win, then gold’s positive sentiment will go even further because it means a bigger stimulus program.”