Democratic candidate Joe Biden is on the verge of the White House on the planned victories in Michigan and Wisconsin
Yellow metal prices rose as the US dollar moved in the opposite direction
A break above $1,930 will pave the way for a $1,975 test, especially if the dollar continues to weaken
Gold prices rose nearly 1% on Thursday after the US dollar fell on new updates from the U.S. election campaign that signal that Democratic candidate Joe Biden is close to the White House.
Fundamental analysis: Dollar slips while Biden takes a big step towards the presidency
Spot gold prices fell yesterday due to uncertainty surrounding the US presidential election. The dollar moved in the opposite direction.
“The sharp rise in the dollar index has put downward pressure on the precious metal,” said Han Tan, an analyst at FXTM.
“With the path of the blue wave now obscured, a split Senate threatens to slow any passage of new U.S. fiscal stimulus measures. Such a prospect will initially dampen gold’s ability to rise higher.
President Trump triumphed in the swing states of Florida, Ohio and Texas, while AP and NBC News are now calling Michigan and Wisconsin in Biden’s favor. In this case, Biden must maintain his lead in Arizona and Nevada to be elected as the new president.
“A Democrat in the White House would lead to a weakening of the dollar because of the additional spending and the nature of the mandates he would set,” said StoneX analyst Rhona O’Connell.
“The weaker dollar does not necessarily reflect a loss of confidence or anything else; it’s more a question of what the markets would expect from a Biden presidency.
Given the decades of inverse correlation between the price of gold and the dollar, the price of gold is likely to continue to rise if the dollar goes down as market analysts have predicted.
Technical Analysis: Descending Wedge Broken
Gold spot prices are currently trading 0.78% higher during the day at $1918 an ounce. As shown in the chart below, the price action broke through the important short term resistance – consisting of the 200 DMA and the wedge resistance – at $1895.
Gold Daily Chart (TradingView)
This break allowed gold traders to open a path to the next resistance line (the red line) at $1,920. A breach above $1,930 will pave the way for a test at $1,975, especially if dollar weakness continues.
Gold prices rose nearly 1% today as investors increased their bets on the higher probability of Joe Biden becoming the next president of the United States.