Gold futures are trading lower on Monday, but are recovering losses from early session weakness. However, early price action suggests that investors should prepare for a volatile trading session, primarily due to uncertainty about the direction of the US dollar. We have already seen bullish action in the market, but rising in the session will be a strong indication that the low for the day is in, especially if the dollar weakens.
At 10:50 GMT, December Comex gold is trading at $ 1904.50, down $ 3.10 or -0.16%.
Early session weakness
Gold prices fell on Monday, as suggestions from the White House that US President Donald Trump was “responding well” to COVID-19 treatment reaffirmed confidence around the world, while also drawing traditional bullion security money.
Positive reports on President Trump’s health are adding to sentiment as they push gold. Doctors treating Trump for COVID-19 said his health is improving and they could send him back to the White House on Monday. However, uncertainty persists as outside experts warn that Trump’s case may be severe.
Gold rises as weaker dollar offsets news of Trump’s progress
After the initial breakout, gold began to rise as the US dollar weakened, although gains were limited as news that US President Donald Trump was receiving treatment for COVID- 19, could be discharged from the hospital, prompted risk sentiment.
Global stocks rose on Monday following news that Trump could be discharged on Monday, although outside experts warned that his case could be severe.
Focus shifts to stimulus measures
Investors may be shifting their focus to new coronavirus relief aid aimed at cushioning the economic blow from the pandemic. The price action of the last two weeks highlights the sensitivity of gold prices to this problem. It suggests that gold needs a stimulus now or there is a risk that prices will decline.
Gold will become more attractive to investors if government policymakers step forward and pass stimulus legislation, or prices will collapse to much lower levels that will be too attractive to long-term investors to let them pass.
Trump’s illness, as well as a weak employment report from September, highlighted the urgency of further stimulus from the coronavirus after a months-long stalemate in Washington. Optimism to reach a compromise has risen after House Speaker Nancy Pelosi signaled progress on Friday, saying “we are continuing to work on the text to move quickly and facilitate an agreement.”
Trump pressed Congress on Saturday to pass a deal. He said in a tweet that lawmakers should “WORK TOGETHER AND DO IT.”
Daily forecast
The headlines are hard to follow, so keep an eye out for the direction of the US dollar. The Trump story appears to be falling to the side as the stimulus comes to the fore. This should keep pressure on the US dollar, while propping up gold prices.
If Trump’s transition back to the White House results in his condition getting worse, then look for traders to turn to the dollar to protect themselves and for gold prices to weaken.
To see all of today’s economic events, check out our economic calendar.
