Jakarta, CNBC Indonesia – US President Donald Trump, who was slightly ‘softened’ about the continued Covid-19 stimulus, had made gold prices soar overnight.
But this morning Thursday (8/10/2020), the yellow metal tends to trade flat.
At 06.20 WIB, world gold prices on the spot market weakened very slightly and tended to be stagnant with a correction of 0.03% from the previous closing position. The price of gold is priced at US $ 1,886.76 / troy ounce.
Until now, the price of gold is still below US $ 1,900 / troy ounce. Previously, when Trump canceled further Covid-19 stimulus negotiations with Democrats until the election was over, gold prices dropped 2% in a day.
However, the latest news that Trump asked that the remaining budget for the first stimulus package be allocated to the US airline sector is in the spotlight of market players. Is this a sign that Trump is starting to soften or is it just a political maneuver ahead of the November 3 elections.
One thing is clear, Trump’s actions contradict calls by the Fed’s US central bank boss Jerome Powell, who said that monetary and fiscal stimulus is still badly needed to save the economy from a more devastating fall due to the COVID-19 pandemic.
“President Trump’s withdrawal from ‘no stimulus negotiations’ to ‘unilateral relief measures’ has helped support gold prices even though the US dollar has only weakened slightly,” said Jeff Klearman, portfolio manager at GraniteShares.
Investors are now waiting for the release of the minutes of the meeting of the Fed’s (FOMC) policy makers, the US central bank, on September 15-16.
“There is anticipation about the inflation rate as a result of the stimulus … and that could be protected by gold,” said Jeffrey Sica, President and Head of Investments at Sica Wealth Management.
Ahead of the US election, the market is still beset with a high risk of uncertainty. It’s just that the prospect of gold until the end of the year is still considered positive. Frank Holmes CEO of US Global Investors is one of those people who believes that the price of gold is still going up.
Seasonal factors are the main driver that will drive gold prices. In an interview with Kitco News, he said that physical gold demand ahead of Diwali celebrations in India, Christmas at the end of the year and also the Chinese New Year celebrations will be positive news for gold prices.
Holmes believes that the price of gold will still touch the level of US $ 4,000 / troy ounce. Despite possible volatility ahead of the election, Holmes said that the outcome of the election will not move gold prices.
“Some people bet on the blue (Democrats), some bet on the red (Republicans), and I bet on gold” he told Kitco News.
Unlike Holmes, in his latest research, Standard Chartered states that if Joe Biden from the Democrats wins, it will push gold prices higher. However, this has not been much considered by the market.
The reason why the price of gold is likely to rise higher is that the negative and very strong correlation between the US dollar and gold.
“” A victory for Biden and Democrats gaining full control over Congress illustrates the weakest scenario for the US dollar, government bond yields and US risk assets in light of the intended fiscal stimulus and tax increases; and given that gold currently has the strongest correlation (above – 50%) with the US dollar, the response of the US dollar is key. “said Suki Cooper as an analyst at Standard Chartered.
If you look back on history, according to Cooper, when the Republic won, the price of gold tended to weaken. “In the last six elections … the response to gold prices ahead of the elections has been mixed, but historically prices have broadly fallen slightly after the Republican victory,” Cooper told Kitco News.
Standard Chartered estimates that the price of gold will return to US $ 2,000 / troy ounce at the end of the year and increase to US $ 2,100 / troy ounce in the first quarter of next year.
CNBC INDONESIA RESEARCH TEAM
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