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Gold holds steady as dollar rally halts; eyes on Trump-Biden debate

· Gold steadied on Monday as the dollar rally took a pause, while traders were on sidelines as political uncertainty built ahead of the first presidential election debate between U.S. President Donald Trump and his Democratic rival Joe Biden this week.

· Spot gold was little changed at $1,860.19 per ounce by 0107 GMT.

· U.S. gold futures were down 0.1% at $1,864.50.

· The dollar index was down 0.1% against rivals, slightly off a two-month peak hit in the last session.

· A firmer dollar makes bullion more expensive for holders of other currencies.

· Trump and Biden will have their first presidential election debate on Tuesday.

· Investors also looked for any signs of further stimulus after U.S. House Speaker Nancy Pelosi said on Sunday a deal could be reached with the White House on a coronavirus relief package and that talks were continuing.

· New orders for key U.S.-made capital goods increased more than expected in August and shipments raced to their highest level in nearly six years, suggesting a rebound in business spending on equipment was underway after a prolonged slump.

· Coronavirus cases are edging closer to 33 million around the globe, with 992,470 reportedly dead.

· Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.02% to 1,266.84 tonnes on Friday.

· Physical gold demand limped higher in top Asian hubs last week, with dealers in India easing discounts to the lowest level in six weeks, as a drop in prices saw a little interest return in the precious metal.

· Gold price to end the year at $2,000 – Capital Economics

Bullish sentiment in the gold market remains healthy even as prices have fallen two a two-month low, according to one research firm.

In a report published last week, commodity analysts at Capital Economics said it expects gold prices to end the year higher after raising its year-end target.

Samuel Burman, assistant commodities economist at the U.K.-based research firm, said in the report that they now see gold prices end the year at $2,000 an ounce and they see prices ending 2021 at $2,100 an ounce. The new year-end target is up from the previous estimate of $1,900 an ounce.

The comments come as gold prices saw their worst selloff since collapsing in March due to the global COVID0-19 pandemic. Gold prices dropped below $1,900, falling nearly 5% last week. Burman said that gold is struggling against rising momentum in the U.S. dollar, which hit a 2-month high last week.

With the Federal Reserve signaling that it expects to hold interest rates at the zero-bound range through 2023, Capital Economics said that it sees nominal 10-year yields ending the year at 50 basis points and remaining there for the foreseeable future.

“This fall, in conjunction with higher inflation expectations as the US economy recovers, will mean that real yields will decline,” said Burman.

Along with rising inflation expectations and lower real yields, Burman said that they see gold prices pushing higher by the end of the year as investors continue to look for safe-haven assets in a world that has been devastated by the coronavirus.

“If COVID-19 is not brought under control soon, ETF demand could rise further, which would provide an additional boost to the price of gold,” he said.

· Investors should not expect the rise in volatility in the gold space to end anytime soon as near-term sentiment shows no clear bias in the marketplace, according to the latest Kitco News Weekly Gold Survey.

Ø  Despite the breakdown, there is still some bullish sentiment in the marketplace. Carsten Fritsch, precious metals analyst at Commerzbank said that the shakeout in the gold market does not come as a major surprise and added that it’s a little over done.

 

“The environment for gold and silver remains bullish,” he said. “Nothing has changed in the last few months.”

 

Ø  Ole Hansen, head of commodity strategy at Saxo Bank said that he is also paying close attention to the U.S. dollar.

 

“It looks like we have more gas left in the dollar tank so the weakness in gold is potentially not yet over,” he said.

 

Ø  Some analysts are watching to see if $1,850 will hold as a new critical support level.

 

Ø  Richard Baker, editor of the Eureka Miner’s Report, said that he expects fears over the spreading coronavirus will continue to support gold prices.

· Silver rose 0.3% to $22.93 per ounce, platinum gained 0.4% to $850.74 and palladium was up 0.1% to $2,217.87.

Reference: CNBC, Kitco