- The Democratic candidate Joe Biden is on the brink of White House on projected wins in Michigan and Wisconsin
- Yellow metal prices inched higher as the U.S. dollar heads in the opposite direction
- A break above $1,930 will pave the way for a test of $1,975, especially if dollar weakness persists
Gold prices soared nearly 1% on Thursday after the U.S. dollar fell on new updates from the U.S. elections race that signal the Democratic candidate Joe Biden is on the brink of White House.
Fundamental analysis: Dollar slips as Biden makes a big step towards presidency
Spot gold prices yesterday dropped on the uncertainty related to U.S. presidential elections. The dollar headed in the opposite direction.
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“The knee-jerk climb in the dollar index heaped downward pressure on the precious metal,” said Han Tan, an analyst at FXTM.
“With the Blue Wave’s path now obfuscated, a divided Senate threatens to slow any passage of fresh U.S. fiscal stimulus. Such prospects are dampening gold’s ability to push higher for the time being.”
President Trump triumphed in the swing states of Florida, Ohio and Texas, while AP and NBC News now call Michigan and Wisconsin in Biden’s favour. In this case, Biden needs to maintain his advantage 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 that he would set,” said StoneX analyst Rhona O’Connell.
“The weaker dollar is not necessarily reflecting the loss of confidence or anything, it’s more a question of what the markets would expect from a Biden presidency.”
Due to the decades-long inverse correlation between gold prices and the dollar, the former is likely to keep advancing if the greenback heads lower as predicted by market analysts.
Technical analysis: Descending wedge broken
Gold spot prices currently trade 0.78% up on the day at $1918 per ounce. As in the chart below, the price action broke above the important short-term resistance – consisting of the 200-DMA and wedge’s resistance – at $1895.
This break facilitated an open path towards the next resistance line (the red line) at $1,920 for gold traders. A break above $1,930 will pave the way for a test of $1,975, especially if dollar weakness persists.
Gold prices gained nearly 1% today as investors increase their bets on the higher likelihood of Joe Biden becoming the next President of the United States.