Gold: US Presidential Election Sees Little Volatility, Fundamentals Key
Unlike the stock markets which have been extremely volatile over the last few days, gold has been extremely steady, ahead of the US elections outcome.
In fact, gold futures was marginally higher at 1,910 per ounce, while spot gold was little changed at $1,906.
For most news channels the election results have been too close to call. Even heading into the elections, gold was little changed.
Investors are looking for other factors to propel gold prices, including a fiscal stimulus in the US, demand, movement of the dollar and physical demand for gold jewellery. However, until a clear outcome of the US Presidential elections, we are unlikely to see a stimulus in place.
The US dollar has also been gaining ground against a basket of currencies, which has ensured that gold does not see runaway gains.
Demand for gold falling
Fundamentally, gold has seen demand falling for the third quarter, especially from the jewellery segment.
Apart from covid, probably an equally bigger reason was the surge in gold prices, which led to demand for jewellery falling. Louise Street, Market Intelligence at the World Gold Council, said: "The impact of COVID-19 is still being felt in the gold market across the world. The combination of continued social restrictions in many markets, the economic impact of lockdowns, and all-time high gold prices in many currencies proved too much for many jewellery buyers. We believe that this trend will likely continue for the foreseeable future.
"However, looking to the investor landscape we saw further record inflows into gold-backed ETFs in Q3, taking the global total to a record high. It was equally encouraging to see gold's role as a safe-haven for retail investors shine through this quarter, as people continue to seek stability in volatile markets."
The US Presidential election outcome is unlikely to impact gold too much. In fact, if the verdict is unclear and it is not accepted by the candidates and there is a period of uncertainty, we might see gold prices rally. Beyond that, fundamentals like demand, movement of dollar and other factors like a fiscal stimulus in the US could play an important role.
In fact, one of the big factors for demand destruction particularly in the jewellery segment has been the sharp price gains seen in the price of the precious metal over the last 9 months. This has resulted in many consumers and investors staying away from the precious metal. In short, other factors would remain crucial for gold price movement in the short term, as we look beyond the US elections.