Gold prices inched closer to their record high on Tuesday amid uncertainty surrounding the upcoming U.S. presidential election, while the market awaited the release of key economic data for additional insight into the Federal Reserve‘s interest rate trajectory.
In the UAE, gold rates surged AED3 with 24-carat gold rising to AED333.50 and 22-carat gold inching up to AED308.75. In addition, 21-carat reached AED299 and 18-carat gold hit AED256.25.
Globally, spot gold rose 0.25 percent to $2,749.72 as of 5:09 GMT after hitting a record $2,758.37 last week. Meanwhile, U.S. gold futures gained 0.25 percent to $2,762.70.
U.S. elections
As the U.S. elections approach, gold’s appeal as a safeguard against market instability could strengthen, aided by a recent pause in the U.S. dollar and treasury yields. While stronger economic data may support more patience in the Fed’s easing process, gold prices will likely stay supported, with interest rate expectations well-anchored around a smaller 25 basis point cut in November.
Donald Trump and Kamala Harris are gearing up for a tight race, with voting set for November 5. Recent polls showed that Trump is gaining some ground over Harris but analysts still forecast a tighter race. Uncertainty over the outcome, which will determine U.S. politics for the next four years, kept traders largely biased towards safe havens such as the dollar and gold.
Fed’s interest rate cut
With just eight days until the Fed’s rate decision, investors are awaiting a series of critical data to gauge their impact on the U.S. central bank’s policy move. Data this week includes U.S. job openings due later today, ADP employment on Wednesday, U.S. Personal Consumption Expenditures and third-quarter gross domestic product data on Thursday, and the non-farm payrolls report on Friday. Following that comes the November 5 election day, when Americans will go to polls to elect a new president.
Gold prices had persevered their gains even as recent data raised bets that the Fed will cut rates at a slower pace in the coming months. Markets are pricing in a 94.9 percent chance of a 25 basis points rate cut by the Fed, according to CME’s FedWatch tool. Lower interest rates reduce the opportunity cost of holding gold, which is also seen as a safe asset during times of economic and political turmoil.
Middle East tensions
Gold prices recovered the losses of the previous session as easing fears of a wider Middle East conflict saw gold slip from recent highs. However, safe haven demand remained strong amid expectations of a tight U.S. presidential race, while upcoming economic prints are also likely to factor into the outlook for interest rates.
Read: Oil prices fluctuate as U.S. purchasing plans and election anxieties impact market sentiment
Other precious metals
As gold prices recovered, the precious metals market regained its losses with spot silver rising 0.29 percent to $33.79 per ounce and platinum gaining 1.05 percent to $1,043.85. Palladium also rose 0.54 percent to $1,225.16 after hitting a 10-month high last week.
However, copper fell 0.16 percent to $4.33. Copper prices retreated as investors awaited more economic cues from China, the world’s biggest importer of the red metal. Copper witnessed steep losses throughout October as recent stimulus measures from Beijing failed to boost confidence in an economic recovery. Focus now shifts to the purchasing managers index data from China, due on Thursday, for more insight into the country’s economic health.
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