Gold posted the biggest weekly gain since July and copper rose as former US vice president Joe Biden tightened his grip on the race for the White House, while investors also weighed prospects for further US Federal Reserve stimulus.
Bullion broke out of a narrow trading range seen over the past month as uncertainty over the US elections and renewed stimulus hopes boosted demand for the haven.
Biden has taken the lead in Pennsylvania over US President Donald Trump, putting him on the cusp of victory in the presidential race.
Photo: Reuters
Bullion gave up some of the early advances as “stocks have come off highs and the dollar is making a modest comeback. There also seems to some notable profit-taking that started around US$1,960,” BMO Capital Markets head of metals derivatives trading Tai Wong said.
The market is looking for an increased likelihood of a Biden victory, and a stimulus package — albeit rather a modest one compared to a blue wave scenario — might be still in the horizon, ING Bank senior commodities strategist Yao Wenyu said.
With the Fed to stand behind the curve, given its new average-inflation targeting framework, it is leading to low or lower real rates, she said, adding that investors would still like to add gold to portfolios.
Fed Chairman Jerome Powell opened the door to a possible shift in the central bank’s bond purchases in the coming months, saying that more fiscal and monetary support is needed.
The Fed kept its stimulus steady at its meeting this week, but a Republican US Senate hamstringing government aid efforts could force it to step up and fill the gap soon.
Spot gold rose 0.1 percent to close at US$1,951.35 an ounce, after gaining as much as 0.6 percent. That extended this week’s gain to 3.9 percent.
The Bloomberg Dollar Spot Index declined 0.3 percent.
In base metals, copper rose 1.4 percent to settle at US$6,946.50 a tonne in London, capping a weekly advance of 3.4 percent.
Zinc reversed an earlier loss to reach the highest since May last year.
While a contested election ending with a divided government would be the least bullish of all possible outcomes for commodities markets, copper could still hit fresh highs next year on the back of faltering supply and robust demand, Morgan Stanley analysts Susan Bates and Marius van Straaten said in a note.
“Once initial volatility has passed, we expect increased focus on the market fundamentals, which remain broadly supportive for base metals,” the analysts wrote. “Copper still features the strongest fundamentals on a tepid supply growth outlook through 2021.”
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