The Daily Market Report: Gold Jumps to 4-Week Highs

01-Nov (USAGOLD) — Gold surged to new four-week highs, buoyed by a weaker dollar and rising uncertainty about the likely results of next week’s U.S. election. The yellow metal is trading more that $10 higher, even as the Fed kicks-off its two-day FOMC meeting.

The Fed is widely expected to hold steady on rates when they announce policy tomorrow, but the market is forever hopeful about gleaning some additional cues as to the likelihood of a December rate hike. The market remains pretty convinced that 25 bps tightening before year-end is baked into the cake.

While the RBA and the BoJ held steady on policy today, both expressed concern about tepid inflation. The BoJ now thinks it will be fiscal year 2018 before their 2% inflation objective is achieved. As discussed in yesterday’s DMR, the Fed too has an inflation problem, the could conceivably derail the potential December rate hike.

The polls for next week’s presidential election have narrowed once again, throwing into considerable doubt who will end up being our president elect. I’m inclined to agree with the analysis of HSBC’s James Steel, who says investors should buy gold, regardless of who wins. Steele sees at least an 8% appreciation in the price of gold.

“Gold is seen as a hedge against political uncertainty,” says James Butterfill of ETF Securities. Political uncertainty seems rampant this election cycle and today’s gains may be reflective of that reality. If you agree, I wouldn’t wait until election day to get your order in.

Marc Chandler of Brown Brothers Harriman has taken notice of both the political uncertainty and the fact that base metals have recently taken off. Chandler believes “that a medium-term bottom is in place and suspect [gold] prices can rally as much as $50 over the next month of so. Initially a move above $1292.5 would target $1300-$1310.” Beyond that, if “risks materialize,” Chandler sees potential toward $1325-$1350.