Hold on to your hats, it's going to be a crazy week for Precious Metals....

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The gold market is holding its breath before the most eventful week of the year.... The first week of November will not only see the most anticipated event of the year, the U.S. election, but also the Federal Reserve interest rate decision and some key datasets, including the U.S. employment figures from October. This is already on top of the extremely volatile price action gold has been seeing during the last week of October.

The precious metal wrapped up the month by losing its key $1,900 an ounce level as prices touched a one-month low of $1,859 on Thursday. At the time of writing, gold is trading at $1,879.30 an ounce. The gold space is seeing very low volumes as most of the price action is guided by algorithmic trading with investors waiting out the uncertainty on the sidelines.

With so much uncertainty in the air, I can NOT stress highly enough - it is not advised selling gold into the election. In fact, I suggest looking past the election-related noise and onto the longer-term macro drivers, which are very supportive for the precious metal.

What happens next week?

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Both, a blue wave or a red wave at the polls will have a positive effect on gold, with the former likely to trigger the biggest gold rally, said Hug. The most significant risk, however, is posed by unclear results or a contested election. Markets have been receiving mixed messages in terms of Joe Biden's versus Donald Trump's ability to win the election.

There is going to be volatility going into Monday and Tuesday night. The real trading days will be Wednesday, Thursday, and Friday. No matter who wins, there is going to be a significant stimulus package thrown into the market, which would be very bullish for metals. There is consensus building in the marketplace that no matter who wins, the U.S. will get the fiscal stimulus, and will continue to have low-interest rates. If there is a blue wave, the US borrows and spends more and gold rallies regardless. If we have a red wave, the US spends a bit less, but it is still good for gold.

The biggest unknown is whether the election results will be known right away. If there is a clear winner, stocks will be up, and metals will be up either throughout Tuesday night or by overnight trading in Europe. If it is a contested election, where there is no clear winner or the results are delayed for a few days, the stock market will come under pressure, people will move to cash, and that could be negative for metals.

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The key question next week is whether the U.S. will have an answer on day one. The worst-case scenario for gold and silver would be a contested election because it creates fear and delays any fiscal stimulus package. Once we have a clear results, the US will be getting the stimulus. Maybe not as big if we get a divided government, but they will get something. And right now, markets have sold off because they've gotten nothing as of yet.

Critical levels to watch for

Gold's short-term support is around the $1,850 an ounce mark, and resistance is at around $1,920/25. If $1,925 is broken on the upside, I'm confident gold could see $1,970. Also, while $2,000 an ounce remains possible for next week, honestly it is not likely.

KEY ADVICE - Why you should look past the election

Markets tend to think the election matters more than it actually does. In some ways, the election is a bit of a red herring. We could get a bit of volatility next week, in fact I'm pretty certain we will. There's clearly a lot of uncertainty. But ultimately, those moves will prove to be pretty short-lived because ultimately, they didn't really change the landscape for what actually drives gold.

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The 2016 Trump election provides an excellent example. The markets saw a lot of volatile moves that were eventually reversed. The Trump election of 2016 provides a pretty good blueprint. There was a huge amount of market movement following Trump's election, and people were focused more on what he could do than what he couldn't do. They were focused on things that ultimately didn't come to pass, and a week or two later, all those moves had unwound. I suspect we'll see something similar this time.

At the end of the day, it's the real yields that have been driving gold this year, which means that the metal's price action is highly dependent on the U.S. economy and the Federal Reserve. For gold, it's the real yield story. What we saw from about March until August was that real yield fell very sharply. Since then, they've sort of started to stabilize or maybe even drift upwards. That explains why gold had its correction and then subsequently why it struggled to make much ground.

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The key question for gold then is, what will happen to real yields? I do see gold back at $2,000 an ounce by year-end, which is more than $100 higher than the current trading levels, and this is why:

Real yields are broken down into nominal yields and inflation compensation. The Fed is going to keep nominal yields very low for a very long time. So what is going to dictate what happens to real yields is inflation compensation. Provided the economic recovery starts to accelerate later this year or perhaps into next year, inflation compensation will start to pick up. So, if we're seeing that nominal yields won't be allowed to rise very far and inflation compensation is picking up, that suggests that real yields will be drifting downwards again, and that is what underpins my upbeat forecast for gold.

Other factors - Fed meeting, jobs numbers

Aside from the election on Tuesday, markets will have a slate of economic data to digest, including the Federal Reserve rate announcement on Thursday. I expect the Fed to continue to stress the need for fiscal stimulus at next week's meeting and The Fed
is likely to retain its dovish bias at Thursday's FOMC meeting with a promise to stand by and offer more stimulus if required. We would expect to see them reiterate the point that fiscal policy is a more effective tool at this juncture.

On the data front, Friday's employment numbers out of the U.S. will take center-stage as well, with the economy estimated (surprisingly) to have added 600,000 jobs in October,

Next week, other key releases include the Bank of England monetary policy meeting on Thursday, U.S. PCE price index and ISM manufacturing PMI on Monday, U.S. factory orders on Tuesday, ISM non-manufacturing PMI and ADP employment on Wednesday, as well as, jobless claims on Thursday.... All in all, its going to be a crazy week!

Want to find out more about gold and silver? Get the latest news, guides and information by following the best community on the blockchain - #silvergoldstackers. We're a group of like minded precious metal stackers that love to chat, share ideas and spread the word about the benefits of "stacking". Please feel free to leave a comment below or join us in the community page, or on discord.

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Posted Using LeoFinance Beta



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You received an upvote of 100% from Precious the Silver Mermaid!

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So much happing at the moment @welshstacker.. Definitely not the time to sell, this time of year Is historically violent in the markets. Add the presidential elections.... and we could swing either way in price!!

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Thanks for continuing to make Hive awesome.

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