Gold Prices See Broad-Based Strength On Election Jitters, Weaker USD
San Francisco (Nov 1) Not only is gold seeing its highest price in almost a month against the U.S. dollar, but it is also seeing broad-based strength against other currencies Tuesday.
Gold currency charts, spot gold is higher against all major currencies including, Japanese yen, Canadian dollar and British pound. Gold is seeing almost 1% gains against the U.S. and Canadian dollar; it is up 0.63% aginst the yen, 0.33% against the pound and relatively flat aginst the euro and franc.
spot gold is showing broad-based gains against most major currencies
Ole Hansen, head of commodity strategy at Saxo Bank, said that he is not surprised that gold is seeing broad support as next week’s U.S. presidential election is creating a lot of uncertainty in financial markets.
“The recent narrowing in the polls is having an unnerving impact on traders,” he said. “With rising uncertainty, you are not going to be selling your gold.”
Although the Federal Reserve starts its two-day monetary policy Tuesday, Hansen said that U.S. economic data and interest rates are taking a back seat to the election. For gold futures, he said that $1,292 an ounce is the first major resistance level traders should watch and a break of that should lead to the ultimate test of $1,304 an ounce.
Ultimately, to end this current correction, gold has to push above $1,300 an ounce, he added.
However, not everyone is convinced of gold’s renewed strength. Neil Mellor, senior currency strategist at Bank of New York Mellon, said that gold’s broad-based strength is mostly due to the U.S. dollar’s broad-based weakness.
“The U.S. dollar is coming off its recent highs, which is not unexpected and gold is seeing a little bit of strength,” he said. “I’m not convinced that gold is a good investment as we are in a global deflationary environment.”
Mellor noted that in a world desperate for yield enhancement, the U.S. dollar -- as the Federal Reserve prepares to raise interest rates in December -- has the potential to move higher.
“Any rise in the U.S. dollar will knock gold prices down,” he said.
Mellor’s idea of a deflationary environment was reinforced overnight as the Bank of Japan left interest rates unchanged as it lowered is growth and inflation forecasts.
The BOJ expects that it will reach its inflation target of 2% by April 2018, a push back from its March 2018 deadline, which was announced in July.
Source: KitcoNews
