Commodity Market: Gold off one-week lows as economic, political uncertainties bolster metal’s safe haven appeal

After recording its biggest daily loss since September 23rd on Tuesday on the back of a firmer US Dollar, Spot Gold managed to recoup part of that loss on Wednesday, rebounding from one-week lows, as economic recovery concerns re-emerged. Uncertainty surrounding the US presidential election after President Trump was diagnosed with COVID-19 is also seen as Gold positive.

Yesterday Gold retreated over 1.8% and the US Dollar advanced against major peers following President Trump’s decision to call off talks on fiscal stimulus with Democrat lawmakers, which fueled investor risk aversion.

Trump, who is still under treatment for COVID-19, surprised markets by calling off economic stimulus talks until after the presidential election on November 3rd, which heightens downside risks for an already shaken economy amid surging new coronavirus infections.

According to Brian Lan, managing director at Singaporean dealer GoldSilver Central, a global environment of low interest rates coupled with uncertainty regarding the upcoming election in the US are factors that work in favor of Gold.

Yet, “if U.S. dollar strengthens more we will see it cap gold prices,” Lan said.

As of 9:17 GMT on Wednesday Spot Gold was gaining 0.58% to trade at $1,889.14 per troy ounce, after earlier touching an intraday low of $1,872.90, or a price level not seen since September 28th ($1,848.80). The commodity has risen 0.12% so far in October, following a 4.17% slump in September, its worst performance since November 2016.

Meanwhile, Gold futures for delivery in December were retreating 0.95% on the day to trade at $1,890.65 per troy ounce, while Silver futures for delivery in December were down 1.07% to trade at $23.665 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was edging down 0.24% to 93.63 on Wednesday, easing from 93.90, its strongest level since October 2nd (94.03).

On today’s economic calendar, at 18:00 GMT the Federal Open Market Committee (FOMC) will release the minutes from its meeting on policy held on September 15th-16th. Gold traders will be also paying attention to statements by several Fed officials for clues on outlook.

Near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of October 7th, investors saw a 100.0% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting on November 4th-5th, or unchanged compared to October 6th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,891.42
R1 – $1,908.03
R2 – $1,937.89
R3 – $1,954.50
R4 – $1,971.12

S1 – $1,861.56
S2 – $1,844.95
S3 – $1,815.10
S4 – $1,785.24