Traders expected a lot more gold price action aha of the US stimulus deadline. Unfortunately, there is no real momentum to speak of just yet. The EU’s joint debts, on the other hand, are another catalyst worth keeping an eye on.
Gold and the US Stimulus Deadline
It is evident that the COVID-19 pandemic continues to make life incredibly challenging for consumers and corporations globally. In the US, talks of a second stimulus package are till not over. A solution is needed today, rather than continuing to postpone it. For those in dire need of financial aid, it seems unlikely that anything will be decided ahead of the upcoming elections.
The deadline to make a decision regarding this matter is today. If no agreement is reached, things will undoubtedly take a turn for the worse. For now, it remains unclear if this will be worse for the US economy or for precious metals. So far, the gold price has not seen much of a change as this deadline draws near.
At the same time, there is a small chance a second US stimulus package will be presented. The Republicans and Democrats are seemingly narrowing their differences. That is hopeful, but it is not a confirmation as of yet. Issuing a second stimulus package will put extra pressure on the domestic economy. In the long term, there will be no winners, regardless of which decision is taken.
In theory, this looming uncertainty paves the way for a precious metals bull run. Financial insecurity often pushes investors to alternative markets, including gold and platinum. So far, both of these markets remain relatively subdued. Not entirely unexpected, as it will take a lot more to trigger bullish conditions once again.
EU Joint Debt Spirals out of Control
Another potential contributing factor is the growing EU joint debt. More specifically, there was an auction today for 17 billion Euro in EU debt. It noted strong demand, as investors were willing to bid for 14 times as much. However, it raises concerns regarding the EU’s large-scale borrowing at the top level.
At the same time, the European Union is intent on increasing its debt pile 15-fold in the next few years. This measure is a necessity, as the two COVID-19 stimulus programs need to be paid for somehow. Whether this debt mutualization is a good thing, remains a matter of interpretation.
Regardless of what happens on the macroeconomic level, no one will deny gold and other metals had a decent year so far. Even if no all-time high is reached in the final months of 2020, the foundations have been laid for more upward momentum. If and when it will happen again, cannot be predicted.
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