Gold prices bounced back at the end of the week gaining 0.58 per cent on Friday after strong selling pressure in the previous sessions sent the metal down to the 1,863-support handle.

The main catalyst in gold last week was the strengthening of the US Dollar following lower stimulus expectations ahead of the presidential election this coming Tuesday. This was likely a short-term speculative move as a relief package will no doubt be passed soon after a winner is declared.

What markets will be looking for is the size of the stimulus package. A Biden victory will likely deliver a larger deal in monetary value than a Trump victory. With polls continuing to favour Biden, markets are likely beginning to price that into gold with the metal set to gain on inflation expectations.

Long term investors should keep an eye out on further dips for buying opportunities in gold as in the coming months we will likely see the effects of a fiscal stimulus programs weigh on the US Dollar as well as coronavirus related headlines dampening economic growth prospects.

From a technical perspective, gold prices have established a relatively strong support level at the 1,863.27 mark. Price action in the coming week will help determine whether gold has bottomed out yet. The main trend remains down on the daily chart, though the short-term momentum is tilting in favour of the bulls.

The upside target will be to cross firmly above the 1,876 handle, with the area in between the 20-day EMA and the 1,894.72 mark in extension likely to cap the upside in the short term. On the flipside, a break below the immediate support of 1,863.27 will open the door to a steeper drop towards the 1,840 and 1,817 longer term support.

Traders may look to conservatively short gold ahead of the elections on Tuesday. A confirmation of a Biden victory will present an opportunity to re-enter long positions for an outlook lower US Dollar with a larger monetary stimulus package on the horizon.

Support & Resistance Levels:

R3 1,940.00
R2 1,913.40
R1 1,894.72
S1 1,863.27
S2 1,840.00
S3 1,817.58

Analysed by: Mr. Thibault Moirez, Independent Analyst