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Gold futures dropped back below $1,900 an ounce on Tuesday, finding little reason to extend a three-session streak of gains as hope for a U.S. stimulus package faded and strength in the U.S. dollar dulled the appeal of the precious metal.
However, a number of investors remain bullish on the prospects for the metal in the longer term, amid expectations that wider government budget deficits in the U.S. and other countries will support higher prices for gold and other precious commodities.
“Gold should continue to rise as the stimulus stalemate (in Washington) might only last a little while beyond the election,” wrote Edward Moya, senior market analyst at Oanda, in a Tuesday note.
December gold GCZ20, -1.54% GOLD, -1.30% fell by $37.90, or 1.9%, at $1,891 an ounce, after posting gains in each of the past three trading sessions.
Silver for December delivery SIZ20, -3.84% SI00, -3.84%, meanwhile, dropped $1.12, or 4.4%, at $24.15 an ounce, following a nearly 0.7% gain in the previous section.
Markets are closely watching the 2020 presidential election race between Democratic challenger and former Vice President Joe Biden and incumbent Donald Trump, with the latter trailing significantly in recent national polls with about three weeks headed into the vote.
Investors anticipate that a fiscal stimulus package to help relieve the economic pressure from the viral outbreak will likely come regardless of the person who sits in the Oval Office but may be more significant if Biden’s win comes along with a broader win for Democrats in Congress—a potential boon for gold.
Experts say that signs of rising cases of COVID-19 in many parts of the world and the reinstitution of some social-distancing measures to limit the spread of the deadly infectious disease could buttress bullion values.
“The Northern Hemisphere is struggling with the fight against COVID and that just means fiscal support is coming,” Moya note.
A pause in a vaccine trial by Johnson & Johnson JNJ, -1.99% also was a focus for investors, highlighting the challenges with bringing to market an effective remedy against the disease.
“Many major industrialized countries, including the U.S., just can’t tamp down the Covid-19 infection spread,” wrote Jim Wyckoff, senior analyst at Kitco.com.
However, a U.S. dollar that has been strengthening recently and U.S. equity markets that remain a few percentage points from all-time highs, have been serving as a drag on gold’s gains.
Gold and silver futures prices were pressured Tuesday, due “in part on a firmer U.S. dollar index,” Wyckoff said.
The ICE U.S. Dollar Index DXY, +0.48% was up 0.5% on Tuesday and has gained about that much so far this week. A stronger dollar can make dollar-priced gold more expensive to those purchasing the commodity using other monetary units.
Other metals on Comex traded lower, with December palladium PAZ20, -3.98% leading those losses, losing 3.6% to $2,339.30 an ounce. January platinum PLF21, +0.25% fell 0.6% to $871.20 an ounce.
December copper HGZ20, -0.58% traded at $3.0375 a pound, down 0.9%.
