Gold prices are rising 1.2% at $1,916 per ounce during today’s early commodity trading activity as investors keep piling on the yellow metal ahead of the US election amid expectations of increased market volatility.
The price of the precious metal has been trading range-bound since rebounding off the $1,860 lows of late September, as investors have once again turned bullish on the stock market following the tech sell-off seen during that same period.
However, gold prices seem to be trending higher again as the November US presidential election approaches, with market participants expecting a spike in volatility during those days, which increases the appeal of gold as safe haven if equities were to falter.
Today’s move in gold is partially explained by a depreciation of the greenback, as the US dollar index (DXY) is losing 0.3% during the European forex trading session at 93.30, its third consecutive day of losses while gold is making its third consecutive day of gains.
Analysts keep favoring gold amid a favorable backdrop
Commodity traders and analysts keep favoring gold as a hedge at a time when volatility is the name of the game.
Only a few days ago, Swiss bank UBS stated that they expected gold to hit the $2,000 mark by the end of the year as the current economic backdrop continues to favor a rise in the price of the precious metal given the uncertainty related to both the US election and the pandemic.
Meanwhile, inflation fears triggered by massive liquidity injections made by central banks around the world keep making a case for buying gold as investors will attempt to protect their wealth from losing its buying power if developed countries start to see a spike in inflation rates once the pandemic is over.
Is XAUUSD presenting a buying opportunity at these levels?
The price of gold has been trading range-bound for a few days but today it is retesting its intraday highs of $1,920 per ounce, a level that has served as resistance three times now.
A move above that level could mean that bulls are taking over the price action and, in consequence, a bigger push could be expected right after.
Overcoming both the $1,920 resistance and the upper trend line of the descending triangle shown in the chart would be, in my view, the most interesting move from a trading perspective, as that could lead to a bull run towards the $1,975 and then to the $2,000 if enough momentum builds up.
Given the positive backdrop that keeps supporting gold prices at the moment, both from a short-term and long-term perspective gold keeps being an attractive asset to own these days.