Gold futures are trading lower on Monday but clawing back losses from early session weakness. Nonetheless, the early price action suggests investors should be bracing for a volatile trading session, mostly due to uncertainty over the direction of the U.S. Dollar. We’ve already seen whip-saw action in the market, but turning higher for 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 $1904.50, down $3.10 or -0.16%.
Early Session Weakness
Gold prices dipped on Monday, as White House suggestions that U.S. President Donald Trump was “responding well” to COVID-19 treatment propped up sentiment globally, while pulling money out of the traditional security of bullion.
Positive reports on President Trump’s health is helping sentiment while pressuring gold. Doctors treating Trump for COVID-19 said his health is improving and he could be sent back to the White House as soon as Monday. However, uncertainty lingers because outside experts are warning that Trump’s case may be severe.
Gold Edges Up as Weaker Dollar Offsets News on Trump’s Progress
After the early break, gold started to move higher as the U.S. Dollar weakened, although gains were limited as news that U.S. President Donald Trump, receiving treatment for COVID-19, could be released from the hospital boosted risk sentiment.
Global stocks rose on Monday after news that Trump could be discharged as soon as Monday, although outside experts warned that his case may be severe.
Focus Shifts to Stimulus Measures
Investors may be shifting their focus on a new coronavirus relief aid aimed at cushioning the economic blow from the pandemic. The price action the past two weeks highlights the sensitivity that gold prices have to this issue. It suggests that gold needs stimulus now or there is risk to lower prices.
Gold will become more attractive to investors if government policymakers step up and pass stimulus legislation, or prices will collapse to much lower levels that will be too attractive to long-term investors to pass up.
Trump’s illness, as well as a weak September jobs report, highlighted the urgency for further coronavirus stimulus after a months-long stalemate in Washington. Optimism for reaching a compromise has risen after House Speaker Nancy Pelosi signaled progress on Friday, saying “we continue to work on the text to move quickly to facilitate an agreement.”
Trump on Saturday put pressure on Congress to pass a deal. He said in a tweet that lawmakers should “WORK TOGETHER AND GET IT DONE.”
The headlines are hard to follow so keep your eye on the direction of the U.S. Dollar. The Trump story seems to be falling to the sidelines, while stimulus moves to the forefront. This should keep the pressure on the U.S. Dollar, while underpinning gold prices.
If Trump’s transition back to the White House results in his condition worsening then look for traders to jump back into the dollar for protection, and for gold prices to weaken.
For a look at all of today’s economic events, check out our economic calendar.