Gold rises amid mixed signals on US elections, expectations of further escalation in the Middle East

November 4, 2024 (Investorideas.com Newswire) Investorideas.com (www.investorideas.com), a go-to platform for big investing ideas releases market commentary from Samer Hasn, Senior Market Analyst at XS.com.

Gold is slightly higher today by 0.15% to $2,740 per ounce in spot transactions while December futures remain near Friday's closing level of $2,749.

Gold's moves come amid anticipation of the start of the US presidential election, which begin tomorrow and is clouded with uncertainty with more convergence in the candidates' chances in the polls. Geopolitical factors add more uncertainty that may contribute to supporting the gains of the yellow metal with anticipation of a new round of escalation in the Middle East that may be more violent than before.

With anticipation of the elections, the gap between Kamala Harris and Donald Trump reached its lowest level since last July, at 0.9% in favor of the Democratic candidate, according to the average of polls according to FiveThirtyEight figures. However, today we have seen a significant decline in the US dollar, which is evident in the light of Harris' 3% lead in Iowa according to Reuters. While the rising bets on a Trump victory have contributed to strengthening the dollar due to the foreign trade policies he may adopt, which could bring inflation back up. This divergence between the different polls could make the markets vulnerable to sharp fluctuations.

Markets are also awaiting the Federal Reserve's decision on interest rates this Thursday, which is almost certain to see a 25-basis point cut. Also, the repetition of Jerome Powell's dovish tone in the speech following the announcement of the decision will contribute to strengthening expectations of a possible cut in December and may also increase the possibility of a cut in January next year, which could push gold towards more record levels. The market may also be closely watching the Fed's view on the health of the US economy after last week's mixed labor market data, as investors will want to be sure that the sharp slowdown in nonfarm payrolls in October was an accident and not a real warning about the strength of the economy.

While the probability of a quarter-point cut in the next three meetings is 98%, 81% and 47%, respectively, according to the CME FedWatch Tool.

The potential escalation of the regional war in the Middle East in the coming days or weeks and the lack of hope for a calm in the near future are not helping to calm gold's gains. After the momentum around the possibility of reaching a ceasefire agreement in either Lebanon or Gaza that could establish a broader calm in the region, talk of a possible Iranian attack on Israel and a possible counterattack has become the prevailing narrative now.

The next Iranian attack has been described as being "strong and complex”, not limited and will include more powerful weapons than before, according to what he Wall Street Journal reported, citing Iranian and Arab officials. While an official also told the Journal that this attack will be after the US presidential elections so that it will not be an influential factor.

This comes after what the Axios website reported about the US administration warning Iran that it may not be able to restrain Israeli attacks in the event of renewed attacks on it. This means that the next rounds of escalation may include an attack on Iranian oil facilities, which may cause another counter-response that may affect other economic interests in the region, which may affect the global economy.

All this comes amid the absence of a near horizon for settling the conflict on various fronts. In Gaza, Hamas still rejects any temporary ceasefire, and Israel wants to obtain the right to renew its operations in the Strip even after the agreement. In Lebanon, Israel also wants to be allowed to resume its attacks even after concluding an agreement, which is what the Lebanese government and Hezbollah reject, according to The New York Times.

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