Gold headed for a third monthly drop — the longest run since 2019 — as investors favored the dollar as a haven in the final days before next week’s pivotal U.S. presidential election, a contest that coincides with a wave of coronavirus cases that’s ripping through the top economy and Europe.
Uncertainty remains high before the Nov. 3 vote, lifting the dollar’s appeal as a safe asset over bullion. The spread of Covid-19 is intensifying in the U.S., where new cases topped 86,000 to set a fresh daily record, as well as right across Europe’s leading nations.
Since hitting a record in August, gold’s advance has faltered, with prices losing their upward momentum as investors questioned whether bullion had 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.
“From now to the election, we suspect the precious metals 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. But we think this will only go so far. With Covid-19 concerns rising and the election coming, we think gold and silver will remain volatile, but will garner more support from safe-haven demand.”
Spot gold was little changed at $1,870.29 an ounce at 7:29 a.m. in London, after closing on Thursday at the lowest since Sept. 25. So far this month, it’s lost 0.9%. Silver was little changed with platinum, while palladium advanced 0.7%. The Bloomberg Dollar Spot Index rose 1.3% this week.
On stimulus, there’s deadlock in the U.S. but the prospect of more action in Europe. 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.
© 2020 Bloomberg L.P.