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Gold Struggles for Direction as US Dollar Firms, Coronavirus Cases Surge

October 26, 2020 at 14:37 by Andrew Moran

Gold futures are struggling for direction to start the trading week. A strengthening US dollar, a resurgence in coronavirus cases, and doubts over another round of fiscal stimulus are weighing on the yellow metal on Monday, leaving gold prices seesawing around the $1,900 mark. Is time running out for gold to retest $2,000 before the year’s end?

November gold futures rose $2.20, or 0.25%, to $1,904.50 per ounce at 14:13 GMT on Monday on the COMEX division of the New York Mercantile Exchange. Gold is coming off its second straight weekly loss, although the precious metal is still up more than 25% year-to-date.

Silver, the sister commodity to gold, is slumping to kick off the trading week. December silver futures tumbled $0.11, or 0.45%, to $24.565 an ounce. The white metal rallied 1.5% last week, bringing its 2020 jump to just below 38%.

A stronger greenback applied pressure on the metals market on Monday. The US Dollar Index, which gauges the greenback against a basket of currencies, surged 0.27% to 93.02, from an opening of 92.76. The index erased last month’s momentum in recent weeks, sliding about 1.3% in October. Year-to-date, the DXY is down 3.5%. A higher buck is bad for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.

Investors were seeking refuge in the conventional safe-haven asset amid a broader financial market selloff. The leading benchmark indexes are in the red due to US average daily new COVID-19 cases hitting an all-time high, prompting health authorities to warn that an “exponential spread” is coming as the country enters the cold and flu season.

Market fears intensified after White House Chief of Staff Mark Meadows conceded that the US is “not going to control the pandemic.” He told CNN on Sunday:

We’re not going to control the pandemic. We are going to control the fact that we get vaccines, therapeutics and other mitigations.

Because it is a contagious virus just like the flu. What we need to do is make sure that we have the proper mitigation factors, whether it’s therapies or vaccines or treatments to make sure that people don’t die from this.

The US has reported 8.7 million confirmed cases and a death toll of 225,000. On Sunday, the country reported close to 60,000 new infections, which comes two days after the US recorded a record high of more than 85,000 cases.

Meanwhile, House Speaker Nancy Pelosi revealed that President Donald Trump and his administration are assessing the latest plan for additional coronavirus stimulus and relief. She expects an official response on Monday. Both the White House and the Democratic leadership have been at a standstill over new COVID-19 spending, with Pelosi proposing $2.2 trillion and the GOP putting forward $1.8 trillion. Since the CARES Act expired this past summer, the two sides have been engaged in contentious and on-again, off-again discussions.

On the data front, the Chicago Federal Reserve National Activity Index dropped from 1.11 in August to 0.27 in September. New home sales decline 3.5% last month, falling short of the median estimate of a 2.8% gain.

In other metal markets, December copper futures shed $0.038, or 1.21%, to $3.0915 per pound. December platinum futures plunged $24.30, or 2.68%, to $882.40 an ounce. December palladium futures dropped $23.50, or 0.98%, to $2,375.10 per ounce.

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