Gold prices closed higher on Monday as news that the U.S. Congress will reach an agreement on a new round of fiscal easing before the 2020 presidential election in a last-ditch effort helped boost buying sentiment, analysts said.
Spot gold closed at $1,903.89 an ounce, up $4.76, or 0.25 percent, after hitting an intraday high of $1,918.21 an ounce and a low of $1,899.49.
Gold futures for December delivery on the COMEX rose 0.3 percent to $1,911.70 an ounce.
Investors have gotten used to the back-and-forth between House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin over a new round of funding for American businesses and workers. American businesses and workers have been hit hard by economic weakness caused by a new generation of pneumonia.
Ms. Pelosi reportedly spoke with Mr. Mnuchin on Saturday, but she appeared to suggest that without a fiscal deal soon, a deal before the 2020 presidential election was unlikely.
In an update, Speaker of the U.S. House of Representatives Nancy Pelosi and Treasury Secretary Steven Mnuchin narrowed their differences in a phone call Monday. Aides say the call between Ms. Pelosi and Mr. Mnuchin lasted 53 minutes. Pelosi has asked the chair of her working group to try to reconcile the differences. Pelosi and Mnuchin will speak again tomorrow. House Speaker Nancy Pelosi still wants’ clarity ‘by the end of Tuesday on whether a pre-election stimulus bill is possible.
Zaner Metals analysts said in a report on Monday that “the path of least resistance in the gold and silver markets is pointing to the upside”, thanks to fresh hopes for a US stimulus package, positive vaccine news from the UK and a weak dollar.
“In addition, gold and silver should be supported by positive economic news from China, which shows better than expected retail sales and overall growth levels commensurate with pre-COVID-19 levels,” they said.
The additional bailout measures are said to be considered bullish for gold, which some are using as a hedge against increased government spending and lower interest rates. Globally, more than 40 million people have been infected with the pandemic, according to data compiled by Johns Hopkins University.
Meanwhile, data released on Monday showed That China’s gross domestic product grew 4.9 per cent in the third quarter from a year earlier, below the average forecast of economists but above the level seen before the outbreak in late 2019.
China is one of the world’s largest importers of commodities and an avid buyer of precious metals such as gold.
At the same time, gold is also supported by a weaker U.S. dollar, which could attract interest from buyers of relatively weaker currencies.
The dollar’s weakness has also given an additional boost to dollar-denominated silver and gold. The dollar fell 0.3 percent to 93.42 on Monday, according to the ICE Futures Exchange dollar index DXY.
Fundamental positive factors
- According to real-time data of Worldometers, as of 0429, October 20, Beijing time, novel Coronavirus confirmed 40.56 million cases, 272876 new cases to 40567637 new cases, 1.12 million deaths and 3203 new cases to 1121555 new cases. The number of countries with more than 100,000 confirmed cases has risen to 46, with Portugal becoming the latest country to surpass 100,000. In addition, there have been more than 90,000 confirmed cases in Costa Rica and Japan. Novel Coronavirus confirmed cases in the United States reached 8.43 million, with an increase of 40,790 to 8438360, accounting for nearly one quarter of the world’s confirmed cases. The number of deaths reached 220,000, with an increase of 323 cases to 225,097, accounting for nearly a quarter of the global total. Michael Osterholm, director of the Center for Infectious Disease Research in the United States, said the next six to 12 weeks will be the darkest hour of the entire outbreak. The vaccine is unlikely to be widely available until the third quarter of next year. Wales, UK today declared a “firewall” -style lockdown to contain coVID-19. The policy will last for 17 days. Concerns about new restrictions in Europe and elsewhere, as well as the uncertainty of the US presidential election, further supported the safe-haven demand for gold, with more than 40 million infected globally from novel Coronavirus.
The office of US House Speaker Nancy Pelosi said over the weekend that she had given the Trump administration 48 hours to reach an aid deal before the November 3 election. Pelosi said that while she still has differences with the Trump administration over a broad coronavirus rescue plan, she believes the bill could be passed before election Day. President Trump has encouraged a deal before the election, suggesting that Mr. Mnuchin should go beyond the current $1.8 trillion proposal, despite opposition from Republican senators over costs. A new round of stimulus will send more money flooding into the market, inflation will rise and the dollar index will come under pressure, while gold will become a hedge.
China’s gross domestic product rose 4.9% in the July-September period from a year earlier, slower than analysts had expected but higher than the second quarter, helped by strong industrial output growth and accelerating retail sales. China is one of the world’s largest importers of commodities and an avid buyer of precious metals such as gold.
Fundamentals negative factors
- Senate Majority Leader Mitch McConnell said On Saturday that a vote on the smaller $500 billion stimulus bill would be held on The 20th and 21st, with a separate vote on the Pay Protection Plan bill to bail out small and micro-businesses. The US Treasury secretary acknowledged last week that it would be difficult to reach an agreement on a stimulus package before the election. Mr. Mnuchin said there were still differences in negotiations between the two parties over a new rescue package and that there was still no agreement on a cap on the amount of money to be spent. The stimulus package has been slow to bring out the bad gold.
- U.S. retail sales rose 1.9 percent in September, well above expectations of 0.7 percent, up from 0.6 percent. Consumer spending on cars, clothing and sporting goods was strong. U.S. retail sales rose at their fastest pace in three months in September, beating analysts’ expectations and suggesting consumer spending rebounded in the third quarter despite mounting headwinds to the economy.
- The University of Michigan consumer Confidence Index in the United States rose from 80.4 in September to 81.2, its highest level during the outbreak. Slowing job growth, a rise in coVID-19 infections and the lack of additional federal assistance have prompted consumers to become more concerned about the current state of the economy, said Richard Curtin, chief consumer economist. But a continued small uptick in the economic outlook over the coming year largely offset those concerns. Strong economic data will boost the dollar’s performance, which in turn will weigh on gold, which plans to trade in dollars.
- Phillip Streible, chief market strategist at Blue Line Futures, said gold prices have strengthened on the back of a falling dollar and that “the market believes there will be some kind of stimulus package in the next 48 hours. People think we will enter a period of inflation in the next quarter. So they will start early.”
2.Td Securities said on Monday there was a risk of another sell-off if gold fell below $1,900 an ounce. “The low threshold for Ctas to unwind their positions could prompt further unwinding in the near term as trend-following positions could halve if gold falls below $1,900 an ounce,” td strategists wrote. However, the long-term outlook for gold remains positive. “Gold traders are underestimating the macroeconomic impact of the upcoming election. Will the blue wave catalyse a reflationary rise in real interest rates? Or will massive fiscal stimulus combined with a very supportive Fed policy bring down real interest rates sharply thereafter? Our money is on the latter.”
- Citibank expects gold to hit a record high before the end of this year and expects the average price of gold to hit a record of $2,275 an ounce next year. Citigroup said in a report it expects silver prices to rise to $40 an ounce over the next 12 months as investor demand continues and industrial consumption recovers in 2021.
- George Gero, managing director of RBC Wealth Management, said investors should brace for some dramatic changes in gold prices as the market digesting a new wave of political and election news on Monday. “Political and election news can move prices rapidly, with gold and the dollar likely to become global safe-haven assets and markets volatile as the campaign heats up,” Wrote Gero. Gero added that there were now more reasons for gold to climb back to $2,000 and silver to climb to $30 by the end of the year. Traders are keeping an eye on the Brexit news, while us-china tensions continue and the pandemic news keeps gold holdings afloat.”
- Todd Horwitz, the chief strategist at 5.BubbaTrading.com, wrote that the overall pattern for precious metals has not changed. Both are still on a longer-term downward trend, which we expect to continue. In other words, we are short and willing to sell more in this rally. In the past few days, December gold has traded between $1,900 and $1,920, while January platinum has traded between $880 and $860. We will sell these precious metals at the top of these levels.