(Kitko News) There is a lot of confusion in the market after US President Donald Trump tested positive for coronavirus. Nevertheless, analysts say gold will continue to gain momentum next week.
“Trump’s news trumps everything else – economic data, stimulus packages, etc.,” said Kevin Grady, president of Phoenix Futures and Options LLC. “Gold pulled back slightly. But with all the money out there, the yellow metal should be higher. There are too many speculators in place of gold right now. They are undercutting the market.”
For now, gold is stuck because it is around the $ 1,900 per ounce mark, Grady told Kitco News on Friday.
Trump’s coronovirus news should push people to gold due to growing uncertainty, but since gold is currently trading in tandem with stocks, a lot depends on the market’s response to next week’s developments, Grady explained .
“Gold and stocks are trading together. There is going to be a lot of uncertainty, and there is a risk that investors will choose to end their positions in the weekend to protect themselves,” he said.
Next week it will be about seeing how Trump’s disease develops and whether there is any chance that the government may approve the additional stimulus, said Kitco Metals global trade director Peter Hug.
“If the president gets really sick, you’d expect it to be positive for the metal because the government’s uncertainty is capable of acting without Trump. Considering that the assumption is the equity market, which is the basis of people’s Weakness is likely to continue. Raise cash, which is negative for metals, “Hug said.” What do we know about Trump, given whether the government will be able to get stimulus packages before the election? The market needs it. If they don’t get it, it’s also problematic for equity markets and metals. ”
It is in the interest of Republicans to get some incentives to help stabilize markets before the election. “If not, the second wave is coming and the economy is going to slow down.”
Hug also cited the worst-case and best-case scenarios for the following week.
The worst case scenario would be for the president to have a more serious implication. “This could potentially involve liquidation in the equity market. People are already scared, so the first instinct may be to run out of cash, which will harm commodities and equities. Gold can trade up to $ 1,850 , Which is a fairly solid line. If we lose, we can test for less than $ 1,800, “Hug described.
The best case would be that Trump has symptoms but can still work. Furthermore, if the stimulus package is passed and the equity market stabilizes. “Gold’s upside potential is close to $ 1,925 and then $ 1,975,” Hug said.
Walsh Trading co-director Sean Lusk said, Trump’s positive coronavirus test right now seems to be “just a bump this week,” but has been in the headlines since this week.
Seasonality is also beginning to play a role here, Lust said, noting that the first two weeks of October are traditionally good for sleeping. “Seasonally, gold will be sold late this summer, Labor of Post-Labor Day, repurchase in October and then right again in November,” Lusak said. “Look for this market to be bought. Investors will return to the dips.”
Lusk said that there is still a lot of money sitting after the election, and there is a chance that gold attempts to climb towards $ 1,980 over the next two weeks.
“We had a nice improvement in gold from its high level of about $ 200. A one percent outlook, gold at the $ 1,980 per ounce level is a gain of about 30% since the beginning of the year. Those are the levels to recover. Will be needed., “Lusk noted.
What to watch next week: US VP debate, stimulus package and FOMC meeting minutes
According to analysts, with Trump in quarantine for the next two weeks, everyone will have their eyes on the vice presidential debate on October 7.
ING FX strategists said on Friday, “With Joe Biden riding in opinion polls, Kamala Harris’ job will be to prevent Pence from getting too many points.” “How will the dollar trade in the wake of these political developments? There are early indications that a major edge for Democrats is seen as reducing the risk of contesting elections, supporting risky assets, and gradually weighed on the dollar . Any Republican can make a comeback. This trend. ”
Another major item on the agenda is the minutes of the Federal Reserve’s September meeting, which will also be released on Wednesday.
The message that markets have received will be largely similar to what Fed Chair Jerome Powell spoke during the press conference after the September rate announcement.
ING chief international economist James Knightley said, “With the dot crude of executives and the FOMC, there is little possibility of interest rate hikes in the next few years. The diagram suggests that it may be 2024 before interest rates rise.” ”
INSG said that the progress of the stimulus package talks will also be monitored in the markets so that there will be a significant jump in the stocks and precious metals market.
In terms of data, the US ISM is a non-manufacturing PMI on Monday and unemployed claims on Thursday.
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