Gold traders see prices rise on US election

Gold traders see prices rise on US election

YLG gold bars on display. Gold prices are expected to move in a range of $1,800-1,950 an ounce this month, according to YLG Bullion & Futures.
YLG gold bars on display. Gold prices are expected to move in a range of $1,800-1,950 an ounce this month, according to YLG Bullion & Futures.

Gold traders estimate gold prices will increase no matter which candidate wins the US presidential election, as the US central bank is expected to continue its aggressive monetary stimulus programme regardless of the victor.

MTS Gold Futures managing director Nuttapong Hirunyasiri said US political factors will support a gold price rise in the fourth quarter. Unlimited quantitative easing (QE) will weaken the US dollar in the long run, thus increasing the price of gold.

Market watchers should also keep an eye on the outcome of the US election today. If Donald Trump wins, stocks worldwide will increase because global trade policy will remain unchanged, he said. If Joe Biden wins, Chinese and Asian stocks will rise in hopes of global trade policy easing.

If neither Mr Biden nor President Trump accept the result of the votes, stock markets worldwide could tumble as a result of deep uncertainty, said Mr Nuttapong.

"The election could have a third outcome as Mr Trump has already set up a legal team and war room to fight the results, and a failure to accept the election results would further aggravate the US economy. The US dollar would continue to depreciate, making the price of gold rise," he said.

YLG Bullion & Futures chief executive Tipa Nawawattanasub said there is likely to be a dispute over the results of the election, which would be positive for gold prices.

If the election is resolved in a timely manner, the US still faces a burden of high public debt, low interest rates and a serious pandemic that will continue to benefit gold prices in the long term.

This month's gold prices will likely move in a range US$1,800-1,950 an ounce and Ms Tipa recommends investing around 5-10% of investment portfolios in gold.

MTS also estimates gold prices will rise to $2,000 an ounce by the end of the year, and increase by 10% next year to $2,200-2,300 an ounce.

The second wave of the pandemic will have a large impact on small and medium-sized companies in the US, producing zombie companies (those that need bailouts in order to operate), so the government will need to support these companies by continuing the QE policy, she said.

The baht is appreciating because neighbouring countries are adopting QE policies to stimulate their economies in response to the second wave of outbreaks, said Ms Tipa. There is speculation Thailand will not adopt a QE policy, but instead use loans because of its strong fiscal position, said MTS.

The price of global commodities such as rubber and sugar have increased significantly during this period and will drive inflation. Price increases will be another problem for Thailand next year, as people's incomes have not changed while the cost of living rose.

The return on investment for gold on a year-to-date basis is 20% and is expected to increase by 10% next year, Mr Nuttapong said.

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