Who will be the new US president is not very important for the gold market
Despite the result of the US election, which is still unknown, gold could make at least some use of the current situation. Many Wall Street analysts agree that the US economy will have to take fiscal measures after the election, which is traditionally the water for the precious metals mill. But the US dollar will also have something to say, on the development of which the price of gold in recent months seems to be very dependent.
Who will affect the price of gold more?
For several weeks now, gold has been flirting with a price level of $ 1,900 per troy ounce, which it reached after a $ 1950 drop in September. Gold rose above $ 2,000 in early August, when a combination of growing concerns about the spread of coronavirus and, paradoxically, growth in stock indices helped it grow, which was mainly affected by the fall of the US dollar. The dollar will probably continue to have the upper hand, but what will the US election do with the price of gold? It seems that gold will get an impulse to grow whether Trump or Biden wins.
The reason is that the United States is most likely to push for more fiscal stimulus after the election. Democrats are pushing for a bigger package than Republicans, but their package is also the second-largest in American history. Simply, America will print hundreds of billions of dollars, which is normally very good news for precious metals. A larger amount of money in the economy is pushing up prices. At the same time, the government deficit reduces the confidence of investors, who prefer to invest their money in safer assets such as gold.
Gold supply on the market
A regular monthly report showed that both gold demand and supply fell in the last quarter. The coronavirus pandemic and lower business activity appear to be to blame. Mining companies have been spending more money searching for new deposits in recent months, but the new gold found is usually of lower quality. The consequence is that much less gold is found than is mined. In ten years, gold mining is expected to fall by 50%. As the largest miners find no significant new deposits and run out of supplies, they will be forced to gradually start buying smaller players in the market.
This may mean a gradual decline in the supply of gold in the market, which is good news for the price in the face of growing demand. However, the intraday price is mainly being dictated by the US dollar. Its development will now depend mainly on the outcome of the US election. If Trump wins, the markets will be relatively calm and the US dollar may not be so volatile. If Joe Biden wins, Trump will not recognize the election and call it a fraud, leading to a protracted lawsuit that will increase risks and boost demand for the dollar, which will put gold under pressure.
Chart: Daily Gold Chart (Source: PurpleTrading cTrader