Gold and oil price analysis in the wake of Europe’s return to lockdown.

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The price of gold rose today due to growing concerns ahead of tomorrow’s US presidential election.
New lockdown measures introduced throughout Europe brought the oil price down
At least seven countries across Europe introduced new blocking measures

At least seven European countries have so far introduced lockdown measures to heighten investors’ short-term concerns. France, Germany, Belgium, Italy, Spain, Portugal and Greece have announced temporary lockdown measures to stem the spread of the novel coronavirus.

All non-essential businesses will have to be closed in France until at least December 1. In a similar step, Germany has decided to enforce a partial closure for four weeks starting today.

“It is with a heavy heart that we have decided on measures, but they are necessary. If we succeed in holding on to the closure for months, we can break through the second wave,” Merkel said today.

Italy has become one of the countries in Europe that have introduced temporary suspension measures. A week ago, the authorities ordered that all bars and restaurants must close by 6 pm, while gyms, swimming pools, theaters and cinemas were ordered to close.

Spain declared a state of emergency and introduced a nationwide curfew between 23:00 and 6:00, which began on Sunday, October 25. People are only allowed to travel if they want to go to work, buy medicine or care for someone.

Gold price rises as investors wait for election results

Gold prices rose on Monday due to growing concerns ahead of tomorrow’s US presidential election.

“We are seeing something of a resurgence in safe-haven buying,” said Harshal Barot, a senior research consultant for South Asia at Metals Focus.

The US dollar, which is also considered a safe haven, moved slightly higher by 0.1% against a group of currencies. Barot added that we are unlikely to see a significant gold trend until the outcome of the election is determined.

Gold Daily Chart (TradingView)

Biden has a solid national lead over Donald Trump, but when it comes to Swing States the battle is much closer.

“The longer-term view is optimistic about the expectation that we will receive a huge flood of economic stimulus from the US, which should ultimately weaken the US dollar and drive up the price of gold,” said Stephen Innes, chief strategist at financial services firm Axi.

Avtar Sandu, Senior Commodities Manager at Phillip Futures, stressed that a “blue sweep” in both the White House and the Senate would greatly enhance the prospects of a quick and large fiscal stimulus, which could be very significant for precious metals.

The number of coronavirus infections in Europe reached 10 million on Sunday, leading to the reintroduction of lockdown measures in the UK and Portugal, following the steps taken by France and Germany.

“Gold traders are concerned that these lockdowns could lead to deflationary pressures… the next trade in gold is really a reflationary trade,” Innes added.

Spot gold climbed about 0.5% to $1,885.00 an ounce, while US gold futures rose 0.2% to $1,884.00, while today’s rise has pushed the price action towards the intraday resistance at $1,890.00, where the 200 DMA is traded. A move up would include the descending trend line, which is trading around the $1,900.00 level.

Oil prices fall due to new lockdown measures across Europe

As Europe returns to lockdown, investors are worried that a new cycle of weaker fuel demand is also beginning. The reintroduction of nationwide lockdowns in some European countries and concerns about the upcoming presidential elections in the United States have brought oil prices down.

EU member states, including France, Germany and the UK, have reintroduced lockdowns to contain the rapidly spreading second wave of the coronavirus.

International oil trading companies expect demand for oil to continue to decline as Vitol forecasts winter demand at 96 million barrels per day (bpd) and Trafigura estimates that it will fall to 92 million bpd or below.

“Many traders are now looking at the US and its rising infection rates and wondering if Europe is providing the model for what will happen in the US in the coming weeks,” said Michael McCarthy, chief strategist at CMC Markets in Sydney.

Oil losses were capped after Japanese exports rose for the first time in two years and factory activity in China almost reached its highest level in a decade.

Crude Oil Daily Chart (TradingView)

WTI and Brent plunged 11% and 8.5% respectively in October for the second consecutive month due to fears of weak demand and increased shipments from OPEC and the United States.

OPEC+ recently announced its decision to reduce oil production by approximately 7.7 million barrels per day (bpd) to support prices.

“Fresh fears that politicians around the world will be pressured to close Christmas this year are hitting the oil markets like a ton of bricks. The alarmingly high level of fear in the markets makes it easy for the oil roller coaster to climb the peaks and ride downhill at an alarmingly high speed,” Innes said.

Brent crude oil futures contracts for January fell more than 4%, while crude oil prices fell about 6% to $33.67 a barrel – the lowest crude oil prices traded since May. In the meantime, the price action has risen back above the $35.00 mark.

Any recovery is likely to be capped by the broken support – now resistance – at $36.50. On the downside, there is virtually no major support on which oil buyers can rely to $31.20.

Summary

Gold traders drove up the yellow metal’s prices on Monday against a background of growing concerns over the upcoming US presidential election on November 3. On the other hand, oil prices fell by 4% after some countries in Europe reintroduced freezing measures and concerns over tomorrow’s US presidential election.

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