Gold heavily depends on stimulus, and the more, the merrier. The optimal scenario is a clean Democratic sweep, followed by a Trump victory. A split between President Trump and the Senate is the worst outcome, Yohay Elam, an Analyst at FXStreet, reports.
Key quotes
“President Donald Trump is trailing rival Joe Biden in national and state polls. According to FiveThirtyEight, he has an 88% chance of winning at the time of writing. Democrats have around 70% probability of winning the House and the Senate. In this ‘blue wave’ scenario – which is the likeliest according to the polls – Dems could approve a bill worth $2 trillion as they nearly agreed with Republicans, or even $3.4 trillion as they originally wanted to do back in May. For the yellow metal, the more the merrier. A break above the all-time highs cannot be ruled out in this scenario.”
“Many still remember 2016 and claim that polls are missing the ‘shy Trump voter’ and that he can still win the electoral college. While surveyors probably fixed some of their problems, there is still a chance that the president squeezes another victory. In that case, Republicans are also likely to cling onto the Senate. In this scenario, Trump may feel he has the mandate to impose his will on Republicans and a stimulus package is likely even during the ‘lame duck’ period. Gold bulls would likely cheer such a scenario, but any rally would be short-lived, as the total package will probably be smaller than a ‘blue’ one.”
“The chances for Biden to oust Trump are higher than for Dems to beat the GOP in the race for the Senate. If Republicans cling onto the upper chamber, they would probably limit any large package. Gold could suffer in response to partisan brinkmanship – especially if the relief deal falls short of the $1 trillion mark. A significant retreat toward pre-pandemic levels is an option as well. Negotiations could be protracted.”
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