Gold futures edged higher, buoyed by a combination of rising expectations for additional fiscal stimulus in Europe and the U.S. as well as uncertainty over the global economic outlook as the COVID-19 cases continue to rise.
“Gold prices are steadily rising as investors start to raise their stimulus expectations on coronavirus second wave fears,” said Edward Moya, senior market analyst at Oanda, in a note. “Gold is also starting to benefit from election risk, as Wall Street can’t ignore the polls anymore and is starting to price in the risk of a Biden presidency,” given presumptive Democratic nominee Joseph Biden’s lead over President Donald Trump in the polls,
The White House and lawmakers face increasing pressure to come up with an additional fiscal stimulus plan ahead of the expiration of supplemental unemployment benefits at the end of the month. Meanwhile, European Union leaders on Friday were kicking off a two-day summit aimed at reaching an agreement on a €750 billion recovery fund.
Gold is on track for a 0.3% weekly rise and is up 18.7% for the year to date after hitting its highest level since 2011 earlier this month and moving within striking distance of its all-time high.
Christopher Louney, analyst at RBC Capital Markets, argued that gold’s gains have been fueled in large part by the “inherent uncertainty” that has accompanied volatility in equity markets.
“Risk overlays are playing a role in the stickiness of recent moves in gold flows and prices, but in our view, it is uncertainty that brought investors to the gold space in size this year and it is likely what is going to keep them there,” he said, in a note.