U.S. election uncertainty to keep a strong bid in gold next week
(Kitco News) - Although there is still plenty of uncertainty surrounding the U.S. election, sentiment in the gold market is unabashedly bullish as Democratic nominee Joe Biden leads in Electoral College Votes and in vote counts in critical swing states.
According to the latest Kitco News Weekly Gold survey, bullish sentiment among Wall Street analysts is at a record high. The positive outlook comes as gold prices have broken through critical near-term resistance, hitting a six-week high. The rally comes as the U.S. dollar has fallen below key support levels, dropping to a two-month low.
"A Biden presidency means that more stimulus is coming. It's just a matter of how much," said Charlie Nedoss, senior market strategist with LaSalle Futures Group. "That is going to be dollar negative and support higher gold prices."
This week 15 analysts participated in the survey. A total of 14 voters each, or 93%, called for gold prices to rise next week; meanwhile, one analyst, or 7%, called for lower prices; no analysts were neutral on gold next week.
Although slightly less bullish than Wall Street, retail investors still remain extremely positive on the precious metal. And the latest price breakout is attracting new interest in gold as participation in Kitco's online survey picked up this week.
A total of 1,310 votes were cast this past week. Among those, 1008 voters, or 77%, said they were bullish on gold next week. Another 188, or 14%, said they were bearish, while 114 voters, or 9%, were neutral.
Last week both Wall Street and Main Street were bullish on gold; however, the sentiment was a lot more subdued as investors were waiting for the results of the U.S. general election. Although markets are still waiting for a definitive result, expectations are growing that Biden will be the next president.
With several states still counting votes, the gold market is seeing its best weekly gain since late-July. After Thursday's breakout, gold prices are up 3.8%. December gold futures last traded at $1,953.30 an ounce.
According to many analysts, all eyes are on the U.S. dollar to see its performance during this period of political uncertainty.
Darin Newsom, president of Darin Newsom Analysis, said that both the U.S. dollar and gold have made significant technical moves, which point to higher prices; however, he added that it is more important to pay attention to sentiment.
"I think right now you can throw charts out the window because emotion is driving all markets. Because there is so much uncertainty in the U.S., I think you have to be in gold," he said. "With recounts and lawsuits, we could be months away from finding out who will be the next president. That I think will weigh on the dollar."
Ole Hansen, head of commodity strategy at Saxo Bank, said that he is also watching the dollar; however, he said that he is bearish on the U.S. dollar as he expects the Federal Reserve will have a step up with more stimulus to support the U.S. economy. Hansen added the U.S. is facing a leadership vacuum as the election results remain uncertain.
"Although the election has gone away, the virus hasn't," he said. "The market is looking for leadership and support for the economy and they are turning to the Fed that will lead to a weaker U.S. dollar."
Colin Cieszynski, chief economist at SIA Wealth Management, said that he also expects to see higher prices as central banks around the world continue to print more money.
The lone vote this week came from analysts at TD Securities. Not only do they see lower prices in the near-term, but in a recently published report, they lowered their fourth-quarter prices to average $1,950 an ounce.