A fading blue wave doesn’t tarnish gold’s potential – State Street Global Advisors

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(Kitco News) – The gold market appears to be getting comfortable around the $1,900 level waiting for official election results to come as it sees the dwindling prospects of a “blue wave”  sweeping through Washington and releasing significant stimulus spending.

George Milling-Stanley chief gold strategist at State Street Global Advisors

However, one market analyst said that while there are still short-term risks to gold prices in the near-term, the precious metal doesn’t need to see a Democratic sweep on Capitol Hill and the White House to move back to record highs.

“A ‘blue wave’ would have given a level of certainty for higher gold prices, but what we are seeing certainly hasn’t diminished gold’s long-term outlook,” said George Milling-Stanley chief gold strategist at State Street Global Advisors.

The comments come with December gold prices last traded at $1,899.70 an ounce, down 0.56% on the day.

Although it could take days before the final election tally is released, polls show that Democrats will retain control of the House, Republicans will continue to hold the Senate, and Joe Biden is expected to be the next President.

“We can expect gridlock, and that means continued uncertainty,” Milling-Stanley said. “That is still good for gold.”

Although the U.S. government faces more years of gridlock, Milling-Stanley said that he expects more stimulus will eventually come. He added that the U.S. economy continues to feel the devastating impact of the COVID-19 pandemic.

“We clearly need a lot of additional relief for the economy. Politicians are going to have to come to some kind of an agreement on some kind of a package,” he said. “We don’t know how big a package it’s going to be, but any package is going to cause dollar depreciation, an increase in the deficit, and rising inflation. These are all favorable scenarios for gold.”

Milling-Stanley said the questions investors are going to start asking are whether the stimulus will come in time and if it will be big enough to provide support for the beleaguered economy.

He added that the potential for government gridlock raises the risks of another recession.

“There is a very real possibility we see a double-dip recession, and that it would probably even accentuate some of the safe-haven buying in gold,” he said.

Looking at the current gold market, Milling-Stanley said even with the U.S. election nearly out of the way, there is enough global uncertainty and turmoil to sustain gold prices around $1,900 an ounce. He added that there is also a risk in the near-term that prices test support around $1,850.

However, he added that gold’s long-term fundamentals remain in place. He added that if gold prices don’t hit $2,000 by the end of the year, then he would expect that target to be reached in the next six to 12 months.

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