Gold price is in focus ahead of the results of the 2024 US presidential election as investors remain keen to watch the impact of the cliffhanger contest between Donald Trump and Kamala Harris on the commodities market.
Gold, which has gained by more than 40% over the past year amid global headwinds, is seen as volatile to the outcome of the presidential election. The verdict will determine the economic trajectory of the US, the world's largest economy.
According to analysts, gold may marginally shed its glitter post the election results as a level of certainty will return to the markets. The metal, seen as a top safe-haven asset, gains the most when uncertainty looms in the equity market.
"Gold prices may ease after the US elections as the market absorbs the reduced uncertainty," Anindya Banerjee, senior vice president at Kotak Securities Ltd., said. "However, any dip is likely to be temporary and may not lead to a sustained downturn."
Spot gold was trading nearly flat at $2,737.9 an ounce in the global market at 9:30 a.m. GMT on Tuesday. On the Comex, US gold futures were down marginally by 0.07% at $2,744.7 per ounce.
In India, gold futures at the Multi Commodity Exchange were trading flat at Rs 78,433 per 10 grammes at 2:10 p.m. IST.
Gold To Edge Lower If Trump Wins?
Trump has promised to impose tariffs, reduce tax domestically and cut down on government spending. These measures may strengthen the dollar, while leading to an increase in the US yields and equities. Such a scenario may not augur well for the gold and silver market, analysts said.
In 2016, when Trump first took charge of the White House, both the metals had slid sharply as the commodities market was unprepared for his presidency.
"After observing his first term, markets are now better adjusted. As a result, we may not see a repeat of the post-2016 election surge in the dollar index, bond yields, and US equities. That said, with recent rallies in the dollar and US yields, the potential for further significant gains in gold may be limited," Banerjee said.
For gold and silver, we might see some profit-taking, but a substantial decline is unlikely.Anindya Banerjee
Prices could stabilise within a range, potentially bottoming out before a resurgence as the dollar index nears its peak, he added.
Despite the downside risks, gold prices will remain elevated in the medium term, considering the geopolitical factors, according to Kranthi Bathini, director of equity strategy at WealthMills Securities Pvt. "The biggest factor to influence gold rates is the escalating tensions between Iran and Israel in the Middle East."
Also Read: US Election 2024: Banks To Energy—The Wall Street Stocks Likely To Swing On Trump Vs Harris Outcome
Harris' Win To Augur Well For Gold Rates?
A win for the Democrat candidate Harris could lead to a partial unwinding of the 'Trump trade' — characterised by higher US yields and a stronger dollar — which has been driven by market expectations.
"As this trade reverses, we might see a decrease in the dollar index and a softening of US yields, especially with a Harris administration likely posing a lower inflationary threat. Such an environment would bode well for gold and silver," Banerjee explained.
A Harris presidency may also signal a stable continuation of existing market trends, which provides a favourable outlook for both gold and silver, he pointed out.
Although Harris has taken a slim lead of less than a percentage point over Trump in pre-poll surveys, the markets have been pricing-in a likely Trump win, according to Bathini, as he pointed towards the rise in 'Trump trade'.
"If Harris wins, there will be a short-term slide in the Wall Street indices. Her win would result in status quo, as compared to Trump's plan of tax cuts and deregulations," he explained. "This may disappoint the markets for a short period as the US economy may not get the booster shot, which Trump had planned. Such an environment will benefit gold."
Irrespective of the technical indicators, gold price can move either way as the metal moves more on "sentiments and less on fundamentals", according to Bathini.
Some of the analysts are also of the view that there can be some safe-haven demand for gold this week if the election results are not clear. A tight contest means that a winner might not be projected till the absentee ballot votes are counted by next week.
The lack of clarity on the US election results, combined with the anticipation over the Federal Reserve meeting on Nov. 7, could lead to a swing in gold prices.
"Comex gold remains steady above $2,740 per ounce as the countdown to the tight US election intensifies, with markets also awaiting the FOMC statement later this week," said Kaynat Chainwala, assistant vice president for commodity research at Kotak Securities.
To track the live updates of US presidential election, stay tuned here.
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