Stocks remained bid again after what has been a very strong past couple of days amid raised expectations of even looser monetary and fiscal policies around the world due to the pandemic, with more stimulus likely under Biden’s leadership insofar as the US is concerned.
Today it was the Bank of England’s turn to open its tap of freshly-created money as it increased QE by £150 billion, some £50 billion more than £100 billion expected. The news failed to undermine the pound, however. We saw a very similar response in the Aussie dollar when the Reserve Bank of Australia loosened its belt earlier in the week too. In both cases, stocks have benefited more with gold also receiving a boost on lower yields expectations. Risk-sensitive currencies like the AUD and GBP have risen alongside stocks, rather than being undermined by policy loosening from central banks.
Speaking of gold, it too has found decent support after the likely outcome of US presidential election — that is, a Biden victory and a split legislature — has raised speculation that conditions in the world’s largest economy will remain supportive for all sorts of asset prices, including gold. Investors are betting that a potential Biden win will pave the way for a bigger fiscal stimulus package than would have been the case if Trump was re-elected, while a Republican-controlled senate will make it unlikely that Trump’s corporate tax cuts will be rolled back.
Gold has had lots of opportunities to go lower, yet it hasn’t. Prices have spent a significant amount of time consolidating near the highs, suggesting the bulls have remained in control. If the metal was going to drop it should have done so by now, you would think. But its refusal to do that is what make me remain bullish on gold, especially given the above fundamental considerations.
From a technical point of view, gold formed its first higher high above its most recent high of $1910ish following the US presidential election. The metal has also held above the broken bearish trend line. The path of least resistance is to the upside again. Gold could find further technical buying if it can now reclaim that $1920/1 pivotal area on a daily closing basis. If so, I would think $2000 could be revisited and possibly surpassed soon.
