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Summary
- Gold and crude oil prices surged over market speculations as voting wrapped up in U.S. 2020 Presidential elections.
- The price movement and a gradual increase in volatility hint at crude oil traders locking horns over different market expectations.
- So, what will happen to gold and risky assets such as crude oil, if Joe Biden wins? Or What would happen if Trumps wins once again?
Gold prices are back in focus as the U.S. 2020 presidential election reaches the crescendo. The gold spot market has demonstrated an upper bounce during the trading session on 4 November 2020 with gold spot surging from the recent low of USD 1,859.67 per ounce (intraday low on 29 October 2020) to the present high of USD 1,916.47 per ounce (12:24 PM AEDT).
Also Read: Is the Gold Price Ready to Move Out of Shadows?
Likewise, the Brent crude oil futures spiked from USD 35.74 per barrel (intraday low on 2 November 2020) to the present high of USD 40.48 per barrel (12:24 PM AEDT).
The price movement and a gradual increase in volatility indicate that crude oil traders seem to be building on different market expectations.
While expectations of big guns are inducing some volatility in the gold spot, the retail speculation is also gathering steam with Open Interest on future contracts of gold and crude increasing steadily.
So, what will happen to gold and risky assets such as crude oil, if Joe Biden wins? Or What would happen if Trumps takes a clean sweep once again?
What If Trump wins: Market Speculations
Currently, the market anticipates the dollar to remain strong if Trump comes out victorious, thanks to the U.S. president’s conservative approach concerning trades and cross-border relationships.
With a strong dollar in the picture, the safe-haven asset gold might come under some pressure, favouring the U.S. stock market, which during the Trump administration has seen fresh record highs.
Furthermore, the U.S. shale industry is one of the leading contributors of the U.S. economy, and the current pullback in the domestic crude oil production is supportive for crude oil bulls. Under the If-Trump speculations, risky assets are anticipated to thrive more, including crude oil.
What if Biden wins: Market Speculations
On the flip side, Biden’s green economy push could induce more pressure on the oil industry.
Biden’s win would be seen as bearish for risky assets, however favourable for the gold bulls.
However, no one frankly knows what would happen ahead in time, until certain price influencers for risky assets and gold emerge in the market.
For example, for those who argue that Trump’s victory is a positive sign for the U.S. stock market, they should also consider that the rally in the U.S. market has been well supported by various stimulus moves undertaken by the Fed and the government.
Thus, if more stimulus is anticipated, the liquidity driven rally might get more strength irrespective of who makes it to the oval office once again or not.
Likewise, rather than Trump’s or Biden’s wins the current focus of an astute investor should be on the growing volatility in risky and safe assets.
So, a traditional risk to reward relation should be more emphasised rather than trying to figure out who will win the U.S. presidential elections on 6 November 2020. Until the results are out, volatility is par for course.
To Know More, Also Read: How would the race to the Oval office and covid-19 vaccine impact on the gold market?
