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Gold price rallies $50 as Biden maintains lead, markets look past litigation - TD Securities

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(Kitco News) The precious metals surged on Thursday as markets looked past litigation threats and focused on the weaker U.S. dollar, according to TD Securities.

“Precious metals rebound, looking past near-term implications for real rates and towards a weakening dollar. Thus far, the market is looking past litigation threats,” TD Securities strategists said on Thursday.

Democratic candidate Joe Biden continues to lead in the polls, with more clarity expected Thursday afternoon. The Electoral College count currently has Biden with 264 votes and Trump with 214.

States that are yet to be called are Arizona, Georgia, Nevada, Pennsylvania, North Carolina, and Alaska.

“While a Republican senate is interpreted as implying a smaller fiscal package and potential gridlock during the lame-duck session, a Biden presidency has done more to reduce the geopolitical premium, resulting in a weaker USD, which in turn is supporting gold prices,” the strategists said.

A weaker U.S. dollar is good news for gold, which has allowed the precious metal to make solid gains and to surge well above $1,900 an ounce. At the time of writing, December Comex gold futures were up 2.81% on the day, trading at $1,949.40 an ounce.

On top of the election news, markets are starting to price in the rise of coronavirus cases, which has negative consequences for economic recovery.

“Long-term rates are melting at a fast clip as the market reverses the Treasury supply angst and starts to price the recent rise in COVID cases and its implications for growth,” the strategists noted.

Investment flows into gold are also expected to pick up soon, with TD Securities advising to watch for the $1,940 an ounce level.

“The popular SPDR gold fund is on track for the third week of cuts in gold holdings, the largest consecutive weekly drawdown since November 2019. However, we argue that investment flows should resume in short order,” the strategists said. “The bar is razor thin for trend followers to add to their gold length — a break above $1,940/oz would translate into a modest buying program.”

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