Gold prices may rise if Trump wins US election; check trading strategy here

Gold rate today: Donald Trump coming to power is likely to heighten the Sino-US trade tensions, which would be positive for gold

Gold seen highly volatile in the near-term on the US presidential election result

Gold Performance:

 

Spot gold was steady and changing hands at $2,737 at the time of writing this report as the metal traded between $2,725 and $2,750.

 

The MCX December gold contract was trading at Rs 78,452, up 0.04 per cent.

 

US Dollar and yields:

 

The US Dollar Index was noted at 103.57, down nearly 0.30 per cent on the day. However, the US yields, reacting to the US ISM services report, spiked. The ten-year US yields at 4.358 per cent were up nearly 1.70 per cent on the day, while the two-year yields, at 4.23 per cent, were up around 1.50 per cent.

 

Data roundup:

 

The US ISM services Index came in at 56 (prior 54.90) as against the forecast of 53.80 as ISM services employment surged into expansion zone. ISM prices paid at 58.10 beat the estimate of 58.

 

Upcoming data and event:

 

The major US data to be released today include unit labour costs, and weekly jobless claims.

 

FOMC will deliver its monetary policy decision on November 7. The Fed is expected to slash interest rates by 25 bps to 4.50-4.75 per cent range. The Bank of England will also decide on its monetary policy on November 7. The Bank is expected to cut the benchmark rate by 25 bps to 4.75 per cent.

 

Gold ETFs:

 

Total known global gold ETF holdings stood at 83.857 Moz as on November 11 -- slightly lower than 83.969 MOz seen at the end of the last week. The US Mint said that American Eagle gold coin sales totalled 25,000 ounces in October as compared to 27,000 ounces in September.

 

Gold price outlook:

 

Gold may get a boost from uncertainty over the US election results. A quick result may weigh on the metal though.

 

Donald Trump coming to power is likely to heighten the Sino-US trade tensions, which would be positive for the metal. Overall, as traders focus on the ballooning US fiscal deficit, rising US debt/GDP ratio, geopolitics and inflationary factors, Trump's victory will boost the appeal of the yellow metal. 

 

The metal is likely to do better in case he comes to power. The metal may initially drop on concerns about fiscal deficit driving US yields and Dollar higher. It is advisable to buy the dips as fundamentals remain constructive on medium to long term basis. 

 

On the other hand, Kamala Harris winning the US presidential elections will weigh on the metal as her economic policies are somewhat less inflationary and expected to lead to a sustainable and equitable growth with relatively a smaller borrowing.

 

Overall, gold is expected to be highly volatile and choppy as the election results pour in. The metal is expected to do well in medium to long term irrespective of who comes to power.

 

Support is at $2,700 (Rs 77,400), $2,685 (Rs 77,000), and $2,600 (Rs 74,500). Resistance is at $2,760 (Rs 79,100), $2,800 (Rs 80,200), and $2,850 (Rs 81,700). 

 

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Disclaimer: Praveen Singh – Associate VP, Fundamental Currencies and Commodities, Sharekhan by BNP Paribas. Views expressed are his own.