As the countdown to the US presidential election continues, gold prices have steadied after experiencing a dip to a five-day low. On Tuesday, the precious metal found support at $2,724 before bouncing back to the $2,740s, as traders remain on edge over the election’s potential impact on the markets.
The Political Landscape and Gold’s Response
The upcoming election presents a polarizing scenario for the US Dollar (USD) and, consequently, for gold (XAU/USD). Analysts note that a victory for Republican nominee Donald Trump could bolster the USD, whereas a win for Democrat nominee Kamala Harris might lead to a weaker dollar, both scenarios creating a “win-win” for gold. With election forecasters giving Harris a 50% chance of victory and Trump at 49%, the uncertainty alone is fueling safe-haven flows into gold.
“Regardless of the outcome, significant political shifts can unsettle financial markets, and such uncertainty typically fuels volatility, which can serve as catalysts for higher gold prices,” states Matthew Jones, a precious metals analyst at Solomon Global.
Technical Analysis Signals Potential Downtrend
Despite the support for gold, technical indicators suggest a possible reversal in the short-term uptrend. The yellow metal is showing signs of a downtrend as it continues to leak lower, establishing a sequence of falling peaks and troughs on the 4-hour chart. A break below the recent low of $2,724 could confirm this trend, potentially leading prices down to the recent range’s bottom at around $2,709.
Moreover, the Relative Strength Index (RSI) is displaying bearish divergence, indicating strong underlying selling pressure, which could further support the case for a price decline. Should this trend continue, traders will be closely watching for any signs of recovery that could push gold back toward its all-time high of $2,790.
Also read : Gold Price Analysis- The Significance Of The $2,746 Resistance Amid Election Uncertainty
Geopolitical Tensions and Inflation Concerns
Simmering geopolitical tensions in the Middle East add another layer of complexity to gold’s outlook. With Iran’s supreme leader threatening a “crushing response” to recent US and Israeli actions, investors are likely to view gold as a safe-haven asset amidst these uncertainties.
If Trump secures victory, analysts predict inflationary pressures and geopolitical tensions to rise, amplifying gold’s appeal. Conversely, if Harris wins, her proposed government spending on social programs and infrastructure could exacerbate budget deficits, potentially weakening the USD and stoking inflation fears, leading investors to turn to gold as a hedge.
