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(Kitco News) – The gold market is treading in place, stuck in a consolidation pattern for over a month due to political instability that has dominated the market.
Gold price has been tied tightly at 1,900 USD / ounce as investors hesitate to make a big bet ahead of US general election. According to analysts, memories of election night 2016 are still very vivid at the time of New Year’s Eve is said to be an unprecedented event.
Charlie Nedoss, senior market strategist at LaSalle Futures Group, said in a recent interview with Kitco News: “I think a lot of investors want to raise the price of gold but they can’t forget what happened. 4 years ago. “A lot of investors are sitting around, waiting to see who will win.”
The 2016 election night saw one of the biggest volatility in gold’s recent history. Gold started gaining points late in the evening after Republican candidate Donald Trump began to win in major swing states, including Ohio and Florida, and North Carolina.
According to many analysts, the precious metal looks like an attractive safe-haven asset because they expected a Trump victory to create political instability in the financial markets. This uncertainty caused the stock market to sell off as Trump’s victory strengthened. Many analysts also bet that a Trump presidency opens lower interest rates.
However, the rise of gold did not last long. Trump gave a winning speech at 2:30, and many experts say it a lot like the president. His speech made a dramatic change in investor sentiment and stocks started to rise. Many investors have also begun to expect that a falling interest rate will be good for the stock market.
By Wednesday morning, the gold market had abandoned all gains and was trading in the negative zone. The gold price has seen a 10% price fluctuation for several hours. The precious metal never really recovered and finished trading lower throughout December.
Many analysts notice a lot of similarities between the 2020 election and the environment four years ago. Many experts predicted that then Democratic candidate Hillary Clinton would become the next president.
Four years later, polls have seen Democratic candidate Joe Biden hold a solid lead nationwide and in key revolving states. Some experts also argue that Democrats gain control of Congress, gaining 52 seats and a majority in the Senate.
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However, many still do not rule out another victory for Trump. Adding to this year’s uncertainties are the looming issue of disputed outcomes or extended counting times.
More than 100 million Americans voted in advanced polls, nearly a third of all who voted in 2016.
Daniel Briesemann, precious metals analyst at Commerzbank, said in a recent interview with Kitco News: “According to the polls, Biden looks likely to win the election, but you don’t know what will happen.
Briesemann says he sees two scenarios that will rise in price for gold in the short term, one that will be a clear win for Biden and the Democrats that control Congress.
“There will be a lot of expectation for a huge stimulus if Democrats win,” he said. “That would be extremely optimistic for gold.
Briesemann added that the second up scenario would be if the outcome is disputed. “A controversial election will create prolonged political instability, which is in favor of gold as a safe haven asset.”
According to many analysts, the worst scenario for gold would be if Congress remains divided as Republican senators will continue to push back on massive stimulus measures.
However, the main factor that makes 2020 so much different from four years ago is that the COVID-19 Pandemic has killed more than 230,000 Americans and devastated the economy.
Many economists and analysts believe that whoever is in power, the government will have to launch more stimulus measures to support the besieged economy.
“Regardless of who gets elected, the virus continues to hurt the economy and that slowdown will mean governments will have to act. At this point, the US election is not the replacement. game changers that will drastically change the fundamentals in the gold game Ole Hansen, head of commodity strategy at Saxo Bank, said.
Disclaimer: The views expressed in this article are those of the author and may not reflect the opinions of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, Kitco Metals Inc. and authors cannot guarantee such accuracy. This article is for informational purposes only. It is not an invitation to exchange any commodities, stocks or other financial instruments. Kitco Metals Inc. and the author of this article does not accept responsibility for damages and / or damages arising from the use of this publication.