Gold trades higher amid US presidential election uncertainty

The price of gold rose early in the European session on Monday.
Demand for safe-haven assets amid the uncertainty of the US presidential election and ongoing tensions in the Middle East could lift the price of gold.
Traders are bracing for Tuesday’s US election results ahead of the Federal Reserve’s rate decision.

Gold The price (XAU/USD) is trading in positive territory on Monday. Risks from the US presidential election and ongoing geopolitical tensions in the Middle East are likely to keep the yellow metal, a traditional safe-haven asset, stronger in the near term. However, renewed demand for the US dollar and higher US bond yields could limit the upside potential for gold prices as higher yields make non-yielding assets such as bullion less attractive in comparison.

Investors will be keeping a close eye on the upcoming US presidential election on Tuesday. Attention turns to the USA Federal Reserve Fed rate decision on Thursday. Uncertainty over the US election outcome is one reason markets believe the Fed will cut rates by the usual 25 basis points (bps) on Thursday rather than repeat its excessive half-point easing.

Market Drivers Daily Digest: Gold Price Remains High Ahead of US Presidential Election

“ETFs should see further inflows due to expected lower interest rates, high fiscal deficits and highly valued equity markets. However, investment demand in the fourth quarter may be greatly affected by the results of the US elections. Central bank gold purchases are likely to be strong again this year, but not at the levels seen in the previous two years. Jewelry demand is also expected to be lower than in the previous year, although slightly higher than WGC had previously expected,” Commerzbank analysts said.
PredictIt put Harris at 51% likely to win Tuesday, the vice president’s first lead over Trump (who has a 49% lead over Harris) on the site since Oct. 9.
US NFP increased by 12 thousand in October, which is the smallest increase since December 2020. This figure followed a 223K gain (revised from the 254K seen in September) and was well below the market consensus of 113K.
The unemployment rate remained unchanged in October at 4.1%, in line with expectations.
Financial markets have fully priced in the US Federal Reserve’s (Fed) rate cut of 25 basis points at its November meeting on Thursday.

Technical analysis: Gold price remains bullish in the long term

The price of gold increased that day. The bullish picture prevails for the precious metal as the price holds above the key 100-day exponential moving average (EMA) on the daily chart. Additionally, the 14-day relative strength index (RSI) is above the 50 midline around 60.20, indicating that the support level is likely to hold rather than break.

Additional green candles above the all-time high and the psychological mark in the $2790-$2800 zone could lift XAU/USD to $2850.

On the other hand, sustained trading below $2,715, the Oct. 24 low, could see the yellow metal fall to $2,624, the Sept. 30 low, followed by a round $2,600 mark.

Frequently Asked Questions about Risk Sentiment

In the world of financial jargon, two commonly used terms “risk” and “at risk” refer to the level of risk that investors are willing to accept over a specified period. In a risk-oriented market, investors are optimistic about the future and are more willing to buy risky assets. In a risk-free market, investors begin to “play it safe” because they are worried about the future, and so buy less risky assets that are more certain to produce profits, even if they are relatively modest.

Typically, during periods of “risk” stock markets will rise, most commodities – with the exception of gold – will also rise in price as they benefit from positive growth prospects. The currencies of countries that are major exporters of commodities are strengthening due to increased demand, and cryptocurrencies are rising. In the ‘risk’ market, bonds are rising – especially large government bonds – gold is shining, and safe-haven currencies such as the Japanese yen, Swiss franc and US dollar are benefiting.

The Australian dollar (AUD), Canadian dollar (CAD), New Zealand dollar (NZD) and minor currency pairs such as the ruble (RUB) and South African rand (ZAR) tend to rise in markets that are “risky”. This is because the economic growth of these currencies is largely dependent on commodity exports, and commodities tend to rise in price during risky periods. This is because investors anticipate greater demand for commodities in the future due to increased economic activity.

The main currencies that tend to rise during risky periods are the US dollar (USD), Japanese yen (JPY) and Swiss franc (CHF). The US dollar because it is the world’s reserve currency, and also because in times of crisis investors buy US government debt, which is considered safe because the world’s largest economy is unlikely to default. Yen – due to increased demand for Japanese government bonds, since a significant part of them belongs to domestic investors, who are unlikely to abandon them – even in a crisis. Swiss franc because strict Swiss banking laws offer investors enhanced capital protection.