Gold prices zig zag as US election looms

Gold prices have experienced an erratic run in recent weeks, falling from $2776.19 an ounce on August 18 to as low as $2647.95 an ounce on September 8, according to ABC Bullion.

The precious metal has had a record run this year, reaching prices as high as $US2,000 ($2,805) per ounce, the highest prices since 2011.

The ebbs and flows in prices are attributed to lingering economic uncertainties as the COVID-19 pandemic continues, including concerns of delays to vaccine trials.

Prices have since steadied this week to $2681.96 this morning after a 0.5 per cent fall at the beginning of the week, according to Reuters.

“It is a combination of investors quitting to fund margin calls and a stronger dollar,” precious metals trader MKS SA’s vice president, Afshin Nabavi said. “However, we don’t see a drastic fall in gold because fundamentals are still rock solid.”

Foreign Exchange Market (FOREX) believes volatility will continue for the yellow metal as the upcoming United States election looms.

According to FOREX, gold prices surged by nearly 5 per cent when United States President Donald Trump took office in 2016, and within a month of former president Barrack Obama’s inauguration in 2009 gold prices increased by almost 16 per cent.

“Whether President Trump or Joe Biden take office, election years inevitably affect the United States economy and gold,” FOREX stated.

“Gold tends to rally in September of election years before reversing to trade lower through the presidential inauguration in January, primarily due to the fiscal stimulus and uncertainty.”

But while gold has hit a fresh all-time record high this year, some analysts, including Yung Yu-Ma, chief investment strategist at BMO Wealth Management, warned a Biden presidency and coronavirus vaccine could drastically stunt the yellow metal’s rally.

“If an accelerated vaccine timeline comes to fruition the dark cloud over the global economy would begin to lift and the demand for gold’s ‘safe-haven’ quality would likely weaken,” Ma told Business Insider.

FOREX has listed rising interest rates and bond yields as other factors that could derail the bullish run gold has enjoyed in 2020.

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.