The gold market is holding above the $1900 level despite sharply higher stocks. Hope for another round of stimulus spending out of Washington D.C. has investors buying stocks and risk assets even as President Donald Trump remains hospitalized with the COVID-19 virus. Optimism over Trump’s health is also playing a role on Monday following the President’s recent motorcade appearance yesterday.
The recent downside seen in the gold market may be nothing more than a healthy market correction, and that correction may have now run its course. The previously overbought condition has now shifted to an oversold condition, and that oversold condition may lead to buying interest this week that could stabilize the market and further encourage the bullish camp.
The markets certainly have no shortage of factors that could affect price action. As the global economy continues to monitor the spread of the CIVID-19 pandemic, many investors are now likely watching President Donald Trump very closely after he said he tested positive for the virus late last week. Although recent appearances from the President have been encouraging to his followers, his actual health situation remains unclear and the virus is known to cause significant and rapid changes in those who contract it. A serious downturn in Trump’s condition, for example, could fuel a massive flight to safety and sell-off in stocks and risk assets. A rapid recovery, on the other hand, could be viewed as encouraging and could fuel fresh all-time highs in equities in the weeks ahead.
The rapidly approaching U.S. Presidential election will also likely play an increasing role in the metals markets and other global financial markets. The democratic margin of victory has reportedly spread in recent days, and a Biden win could set the stage for a significant shift in investor thinking and market action. A Trump victory, however, could potentially see stocks continue higher while the dollar index weakens further.
The gold market may now turn its attention to the upcoming election as well as any central bank activity. Despite the widening lead for Democratic candidate Joe Biden, markets may see increasing volatility as the election approaches. Trump has seemingly already begun to set the stage for an election outcome disagreement, although the wider Biden’s lead becomes the less likely Trump may have any ground to stand on following the vote. Although a decisive election result may calm some nerves, others may become increasingly anxious over the notion of a Biden victory and what that could mean for markets and the economy. Given current thoughts of increased taxes and tighter regulations, many investors could choose to head for the exits and markets could see a significant downward slope post-election.
Regardless of who wins the November 3rd election, the stage may be set for higher gold prices. The combination of a weaker economy, declining dollar, central bank easing and other factors may be too much for the bears to handle. The value of gold is quite likely to increase in the months and years ahead, as shifting economic and market dynamics fuel the desire for perceived safe haven asset classes.