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Gold futures early Wednesday were under pressure as the 2020 race for the White House and Democratic majorities in the Senate looked uncertain, and the prospects of a substantial fiscal aid package, which might bolster the bullish case for bullion, appeared to be diminished.
Commodity investors are also awaiting the Federal Reserve’s latest policy update on Thursday in the wake of the tight election race.
“Gold prices did not get a ‘blue wave’ that was supposed to reignite the longer-term bullish trend,” wrote senior market analyst Edward Moya at Oanda in a note.
U.S. election day results haven’t revealed a clear winner between incumbent Donald Trump and the Democratic challenger and former Vice President Joe Biden, with a number of key states still too close to call and mail-in ballots due to the coronavirus pandemic lengthening the process of tabulating state returns.
Key battleground states, Michigan, Wisconsin and Pennsylvania could take days to determine, experts said, even as they appear to lean toward Biden by some unofficial tallies.
See: Biden leads Trump as control of presidency and U.S. Senate are still in doubt
Nonetheless, a broad Democratic “blue wave” sweep on Washington, where a Democrat takes the White House and gains a majority in the Senate, is seeming less likely and curbing the expectation that the government will dole out more funding to help troubled businesses and workers.
Still, precious metals investors say that the longer term outlook for bullion remains strong.
“Gold bulls are disappointed, but should not give up, as a divided Congress will force the Fed to do more for much longer,” wrote Moya.
The Fed could provide more indications that it is ready to deliver further support for financial markets, which could also provide a boost for gold.
Weakness in the dollar, retreating from an overnight surge and a pullback in benchmark bond yields also may be buttressing prices for gold and silver. Bond yields for the 10-year Treasury note TMUBMUSD10Y, 0.783% were 7.2 basis points lower at 0.81% on Wednesday, while the U.S. dollar was down 0.2%, as gauged by the ICE U.S. Dollar Index DXY, -0.04%, a measure of the currency against a half-dozen currencies.
Weakness in the dollar tends to decrease the opportunity costs for investors considering dollar-priced gold as an option versus other perceived havens. Meanwhile, lower yields, also, should raise the prospects for gold against government bonds.
On Wednesday, gold for December delivery GCZ20, -0.15% GOLD, +2.28% was up 90 cents, or less than 0.1%, at $1,911.30 an ounce after a nearly 1% gain on Election Day Tuesday, marking the highest settlement for a front-month contract since Oct. 27, according to FactSet data.
Prices for gold pared some losses after the private-sector payrolls report came in somewhat cooler than expected. A report from Automatic Data Processing ADP, +3.10% showed that 365,000 private-sector jobs were created in October, compared with economists’ consensus estimates for 675,000 by FactSet. That report comes ahead of the more closely followed jobs report from the Labor Department on Friday.
December silver SIZ20, -0.73% SIZ20, -0.73%, meanwhile, shed 13 cents, or 0.5%, to $24.19 an ounce, following a 1.3% gain on the prior session.
