Gold prices rose on Tuesday ahead of the US Presidential election on November 5 and a string of key economic data releases later this week.
Prices have come close to their record high earlier in the session as the traders shrug off easing geopolitical tensions in the Middle East.
At the time of writing, the most active gold contract on COMEX was at $2,766.50 per ounce, up 0.4% from the previous close. Earlier in October, gold prices had touched a record high of $2,772.60 per ounce.
Gold prices had come under pressure on Monday as Israel’s attack on Iran over the weekend had limited impact as it did not target any oil and nuclear sites.
However, safe-haven demand for the yellow metal remains intact ahead of the US elections next week. The uncertainty over the outcome, which will determine US politics over the next four years, kept traders on their toes.
Election jitters
The uncertainty surrounding the elections next week could determine the movement in gold prices.
Most polls have been showing that former US President Donald Trump is leading Vice President Kamala Harris. However, analysts believe that the contest would be closely fought.
Fxstreet.com said in a report:
Persistent safe-haven demand stemming from Middle East tensions and US election jitters continue to act as a tailwind for the precious metal.
In case of a Trump win, concerns about a trade war with China would increase safe-haven demand for gold. Moreover, Trump could also ease sanctions on Russia, while doubling them on Iran.
Economic data in focus
Traders are also focusing on the release of the third quarter GDP data from the US on Thursday.
Additionally, the Personal Consumption Expenditure (PCE) index, the US Federal Reserve’s preferred gauge, will be released on Friday, along with the non-farm payroll data.
All these data are scheduled to be released before next week’s Fed policy meeting. If the data showed further cooling of the economy, it would bode well for more interest rate cuts in the US.
Lower interest rates increase demand for non-yielding metals such as gold and silver.
According to the CME FedWatch tool, traders expect 95% probability of the US Fed cutting interest rates by 25 basis points at its November meeting.
At its September meeting, the Fed had cut rates by 50 bps, surprising the market.
The technical outlook for gold
Gold prices have resistance around $2,770-$2,775 per ounce level, according to experts.
If prices breach the $2,775 per ounce level, the yellow metal could move up to $2,800 per ounce next. Gold prices on COMEX have risen more than 30% since the start of this year.
“That said, the Relative Strength Index (RSI) on the daily chart is on the verge of breaking into the overbought territory and warrants some caution for bulls,” Haresh Menghani, editor at Fxstreet, said in a report.
Hence, it will be prudent to wait for some near-term consolidation or a modest pullback before positioning for any further near-term appreciating move.
Copper prices fall
Among industrial metals, copper prices on the London Metal Exchange fell on Tuesday as traders await more cues from top consumer, China.
The recent stimulus packages announced in China were not enough to generate demand for the red metal. Traders have been expecting the Chinese government to announce economic stimulus to prop up the property sector.
Traders will now focus on the purchasing managers index from China due on Thursday for more cues.
At the time of writing, the three-month copper contract on LME was at $9,522 per ton, down 0.2% from the previous close.
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