(Bloomberg) -- Gold climbed as the dollar trimmed some of its gains in the final days before next week’s pivotal U.S. presidential election.
Uncertainty remains high before the Nov. 3 vote, lifting the dollar’s appeal as a safe asset over bullion while a resurgence in coronavirus cases rips through the U.S. and Europe. The spread of Covid-19 is intensifying in the U.S., where new cases topped 86,000 to set a fresh daily record. In Europe, countries have begun to impose new restrictions in an effort to stem the crisis.
Since hitting a record in August, gold’s advance has faltered, with prices losing their upward momentum as investors question whether bullion has risen too far, too fast. Still, holdings in exchange-traded funds remain close to an all-time high. The macro backdrop for gold remains favorable, and there could be more upside if Joe Biden beats Donald Trump to the presidency and Democrats take control of the Senate, Standard Chartered Bank has said.
With Covid-19 concerns rising and the U.S. presidential election next week, gold and silver “will be highly volatile,” James Steel, chief precious metals analyst at HSBC Securities (USA) Inc., said in a note.
“Increases in risk-off sentiment tend to buoy USD, which weakens gold and silver,” Steel said. “But we think this will only go so far.”
Over the longer term, gold will be supported by European Central Bank monetary policy as it is expected that it will extend its economy stimulus measures, according to Commerzbank AG analyst Daniel Briesemann.
“We do not expect the gold price to fall significantly further,” Briesemann said. “It is likely to face some headwind from the currency side in the coming weeks.”
Spot gold gained 1%, trading at $1,885.83 an ounce at 12:55 p.m. in London, after closing on Thursday at the lowest since Sept. 25. Bullion is on track for a slight gain this month. Silver increased 1.6%, platinum was up 1.2%, while palladium advanced 1.3%. The Bloomberg Dollar Spot Index was on track for a 0.9% rise this week.
In the U.S, there remains a deadlock over stimulus talks but there are signs Europe will talk action to shore up virus-hit economies. Treasury Secretary Steven Mnuchin accused House Speaker Nancy Pelosi of pulling a “political stunt” by refusing to offer compromises. Meanwhile, European Central Bank President Christine Lagarde said there is “little doubt” policy makers will agree on a new package in December.
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