(Kitco News) – The gold market is starting the week on solid footing with modest gains following last week’s nearly 4% rally.
December gold futures last traded at $1,955.40 an ounce, up 0.19% on the day.
Gold’s humble gains after the market’s Sunday evening open comes as Democratic nominee Joe Biden continues to secure his place as President-elect. Although some states haven’t released their official tally from last week’s election, Biden has secured enough votes to win the race to the White House, according to media reports.
Although Biden continues to solidify his place in history, garnering the most votes for any U.S. president, many political pundits said the next few weeks will be filled with uncertainty as President Donald Trump is not expected to give up without a fight. He has already initiated lawsuits in various states in an attempt to shift the results.
According to many commodity analysts, two factors will continue to support gold prices. First, a Biden presidency — even with a divided Congress as Republicans look to control the Senate and Democrats hold on to the House — is expected to lead to more stimulus measures. The second factor is that the ongoing political turmoil will boost gold’s safe-haven demand.
Both of those factors will also continue to weigh on the U.S. dollar as it hovers near a two-month low. Analysts have said that the U.S. dollar will be essential to gold’s future path, higher or lower.
“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. Because there is so much uncertainty in the U.S., I think you have to be in gold,” said Darin Newsom, president of Darin Newsom Analysis, in a recent interview with Kitco News.
Aside from politics, many analysts also expect economic uncertainty to weigh on the dollar and provide renewed support for gold. This past week has seen new records in COVD-19 infections in the U.S. more than 10 million people across the country have been infected, and health officials said that it will only worsen.
Many analysts and economists said that the pandemic will weigh on economic growth heading into the new year.
Ole Hansen said that with the expected political gridlock on Capitol Hill, markets will start to look to the Fed for more leadership on the economy.
“Any new stimulus measures from the Fed is going to drive gold prices higher,” he said. “This seems like the catalyst that could push gold prices to $2,000 an ounce by the end of the year.
Not only do analysts see strong fundamental support for gold, but the market made significant technical moves as prices hold near a six-week high.
Marc Chandler, managing director at Bannockburn Global Forex, said that gold broke above a significant downtrend line; however, he added that gold push back to all-time highs remains allusive.
“[Gold is] not quite off-to-the-races and a rechallenge of $2000. First, it must overcome the $1962 area, which is the halfway mark of the decline from the early August record high and then the (61.8%) retracement near $1989.
Analysts at Murenbeeld & Associates said that the lack of a blue wave in the U.S. election has shifted some bullish expectations for gold prices heading into the new year.
“The election results are not yet set in bedrock, but as it stands, we expect a smaller fiscal package to come than some (possibly even the Fed) had hoped, and we expect increased pressure on the Fed to review further monetary options in the event the economy sputters,” the analysts said in the firm’s weekly report.
The firm said that it sees gold prices ending the year between $1,960 and $1,980 an ounce.
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