Gold may hit record before year-end on US election risk, Citi warns

Bloomberg September 23 | Updated on September 23, 2020 Published on September 23, 2020

A worker handles ABC Bullion one kilogram gold bars at the ABC Refinery smelter in Sydney   -  Bloomberg

The bank’s forecast implies a surge of over $200 for bullion futures

Gold could hit a record before the year-end, aided in part by the risks surrounding the US presidential election, according to Citigroup Inc.

Uncertainty over the contest and delays about the outcome may “be under-appreciated by precious metals markets,” analysts including Aakash Doshi said in a quarterly commodities outlook. The bank’s forecast implies a surge of more than $200 for bullion futures from current levels.

Gold rallied to an all-time high last month as investors sought havens amid the coronavirus pandemic, but prices have slipped back since then. Citi’s outlook reflects rising investor concern about the battle for the White House that pits incumbent Donald Trump against challenger Joe Biden. The already complex race has acquired added tension with Trump’s plan to speedily replace the late Justice Ruth Bader Ginsburg on the U.S. Supreme Court.

The election “could be an extraordinary catalyst for gold flat price and volatility skew late in the fourth quarter, even though historically there is no clear pattern for gold trading or price volatility into and after U.S. elections,” Citi said,. “That is one reason why we expect gold prices to hit fresh records before year-end.”

Futures traded at $1,894.20 an ounce on the Comex at 12:36 p.m. in Singapore, with prices losing ground this week on a rising dollar. Most-active prices set a record $2,089.20 on Aug. 7. In addition to the election, Citi is very positive on gold amid low interest rates, saying it’s in the middle of a bull cycle.

Election day is November 3.

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Published on September 23, 2020
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