A Little Dose of Certainty
Over the last weekend, news media determined that Democratic candidate Joe Biden had won the U.S. Presidency. After waiting since Tuesday for election results, the population and investors were extremely pleased to hear that a result had been reached. Markets opened the week up sharply, with the benchmark Dow Jones Industrial Average finishing higher by over 1000 points.
That optimism may last or prove to be short-lived, however, as President Donald Trump has refused to concede defeat in the election. Trump has also implemented the legal system in what he has described as a fraudulent election process and a long, bitter battle in the courts could potentially be in store.
Although it seems there is little, if anything, that Trump and his allies can do to change the election results, an ongoing battle against those results has the potential to wreak havoc on U.S. and global financial markets. Markets have stood strong since the election, however, and investors appear to be quite comfortable with the results as they currently stand. Even the stock markets, which many had suggested would “tank” on a Biden victory, have remained strong and likely to move higher. The Biden victory could put further government stimulus at the front of lawmakers’ minds, and a significant amount of capital could be seen coming from the government as the nation and world continues the fight against the COVID-19 virus.
The viral pandemic has taken a turn for the worse in recent weeks and now appears to be enjoying the benefits of exponential mathematics. The United States recently crossed the 100,000 cases per day threshold, a level which was warned of previously by Dr. Anthony Fauci. The ongoing spread of the virus may necessitate another economic closure in the U.S. and elsewhere. Some nations, such as Italy, have already begun to implement fresh closures that will have a lasting impact on their economies as well as the global economy.
As the days dwindle down until Biden assumes office, worries over another large-scale closure may intensify and could provide the only major roadblock to higher equity markets. President Trump could also, however, force closures before his term expires in January. Trump taking further action against the virus seems unlikely, however, as he has consistently discussed remaining open and not allowing the virus to dictate life in the country.
The gold market recently saw some significant selling pressure, declining by nearly $100 per ounce in a single session. That sell-off has seen the price of gold drop to under $1900, a previous support level. The bulls may now have their mettle tested as the bears have seen some lower price action and as stocks and the dollar potentially rally further.
The September lows around the $1851 region may now prove to be a key support level, while the bulls need to maintain recent prices or establish a new trading range to maintain control of the daily chart. Tuesday’s highs near $1890 may act as first resistance followed immediately by resistance at the $1900 level.