Gold rebounded in precious metals on October 30 but it closed the last week of the month in losses. It ended below the crucial $1900 level.
The yellow metal showed some signs of recovery as the week came to a close. The US dollar pulled back amid its repositioning into the monthly closing, ahead of the US Presidential Election.
Even so, increasing risks of the COVID-19 resurgence in the US and Europe supported the dollar. In turn, this limited the upside momentum in gold. Uncertainty over the election outcome also continues to underpin the dollar bulls.
As the big week starts, the precious metal holds onto the recent gains. It has, however, formed Doji candlestick on the daily chart, indicating that the bullish pressure is weakening.
The dollar will continue to attract bids as worries are coming into most of the financial markets as election day approaches. Currently, it seems the markets favor this safe-harbor currency.
The outcome of that U.S. presidential election will determine the extent of the possible fiscal stimulus aid. Then this will usher in the next direction that gold will take.
Meanwhile, for fresh trading impulse, markets await the global COVID-19 statistics and US ISM Manufacturing PMI.
Why is Gold getting Bearish?
Gold appeared bearish in the early Asian session, downtrending as the US dollar continued to strengthen against other major currencies. This is due to the US presidential elections drawing near. At the time of writing, gold is drifting above $1875.
The yellow metal gold is known to share a negative correlation with the US dollar. It weakens when the reserve currency gains, making it expensive for other currency holders to buy the precious metal.
Amid the strengthening risk-off sentiment in the markets, the dollar has been trading strong. This uptrend in the dollar is a result of a resurgence in coronavirus cases. The announcement of new lockdown measures across many countries is helping the currency even further.
The risk-off mood is now helping the haven appeal of the yellow metal. It’s now limiting the losses in gold even as the dollar continues to make some gains and trade strong.
Aside from the persistent COVID-19 that’s driving European countries into reintroducing lockdowns, traders keenly await the U.S presidential elections. That is for them to make their next moves in gold. The latest opinion polls suggest the possibility of a tightly contested election.
That scenario alone can possibly lift the price of gold significantly higher in the coming days.