Gold was lifted on Friday as increased bets on a Biden win in the US elections as well as encouraging signs of an agreement over new fiscal stimulus has increased demand for the precious metal. Gold prices were up over 1.8 per cent on the day, bringing the weekly tally up to 1.6 per cent, sealing off a second consecutive week of gains.

Gold is expected to continue to be well supported and may actually break out significantly should the greenback value continue to drop. The Dollar Index corrected sharply down towards the 93 mark as news of fiscal stimulus is weighing on demand. Furthermore, a Biden presidency is widely seen as a furthering of loose monetary policy and increased debt, which also provides headwinds in the buck.

In the medium to long run, gold prices remain heavily influenced by inflation expectations and any signs of continuing stimulus measures will strongly support gold. In the near term, traders are essentially reacting to developments in the US elections and negotiations in Congress over the contentious fiscal bill which Trump previously poured cold water on before making a 180 later in the week. Trump has asked his staff to resume negotiations while also tweeting his support for individual relief packages.

From a technical perspective, after the recent trouble to claw above the 1,915-resistance channel, gold has now firmly broken into clean air. The main trend has flipped in favour of the bulls and it now looks like traders are gaining confidence that stimulus will be coming soon to lift gold prices. Gold prices may accelerate to the upside should the greenback continue to fall in value.

For now, the upside target will be the pivotal 0.5 Fibonacci retracement point at 1,945.36. We can likely expect a test of that point in the coming sessions with potentially the 15^th October deadline for a Brexit trade deal guaranteed to add more volatility in the metal. In the near term, gold remains at the mercy of the fiscal stimulus negotiations between Pelosi and Mnuchin. Any break in discussions may prove costly for gold.

The current downside target for the metal is the 1,900 psychological mark. Traders may look into longing the metal towards the 1,940 zone and shorting above the 1,955 mark. Buying into the dips has seemed to be the best method to trade market so far.

Support & Resistance Levels:

R3       2,019.59
R2       1,975.99
R1       1,945.36
S1        1,914.73
S2        1,876.84
S3        1,815.58

Analysed by: Mr. Thibault Moirez, Independent Analyst