Gold rushes from side to side, first believing in Joe Biden's victory and the blue wave, and then, as Donald Trump narrows the handicap with his opponent, realizing that hopes of a recovery in the upward trend can quickly turn into lost illusions. The precious metal does not know how to react to the strengthening of the US dollar, the growth of stock indices, or to the fall in the yield of Treasury bonds. The last two factors are bullish for XAU / USD, but the US dollar is not yet allowing gold to spread its wings.
Early preliminary ballot counts showed Biden is ahead of Trump. However, Trump has won support from a number of hesitant states. As a result, the gap between presidential candidates is narrowing. And so quickly that Trump hastened to call himself the winner. Biden replied that he did not admit his own defeat. As far as Congress is concerned, the House of Representatives is likely to remain with the "donkeys", while the "elephants" are still fighting for control of the Senate.
Thus, the blue wave is still possible. It is seen as a springboard for a sharp increase in fiscal stimulus, which will create a reflationary environment and fuel a rally in XAU / USD and US stocks. At the same time, the chances that Donald Trump will remain in the White House for another 4 years, and Congress will come under the control of the Democrats, are growing by leaps and bounds. As a result, it will be doubly difficult for the president to channel his initiatives through legislators, increasing uncertainty, and keeping demand for the US dollar strong.
Dynamics of the S&P 500 and gold:
On the other hand, when the passions subside, COVID-19, and the assistance package needed to fight it will return to the fore. There is no doubt that a fiscal stimulus will be provided - Treasury Secretary Steve Mnuchin and House Speaker Nancy Pelosi have agreed on many of the details of the deal. The question is how big it will be.
If Joe Biden comes to power, you should count on at least $2 trillion. The money will go into the economy, accelerate inflation, and support the precious metal. Under Trump, the aid will be smaller, but he is not going to raise taxes, which is good news for both stocks and gold.
In my opinion, the continued uncertainty due to the complexity of the counting of votes and the willingness of each of the candidates to challenge the elections will contribute to the consolidation of XAU / USD. As soon as the situation clears up, the US dollar may face short-term sell-offs due to lower demand for safe-haven assets, which is good news for the precious metal.
Technically, the growth of gold quotes above $1930 per ounce will allow the process of formation of the "Broadening Wedge" pattern to be completed. Rollbacks with a subsequent return to this level can be used for purchases. On the contrary, the renewal of the October low is fraught with the continuation of the peak to $1820 and $1800, where you can start forming medium and long-term long positions.
Gold, daily chart:
