Gold Flat Waits on US Elections

November 6, 2012 at 08:53

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Gold traded little changed on Tuesday as investors awaited potential policy spin offs from the U.S. presidential election, while China’s upcoming leadership transition and Greece’s strike over a new austerity package also kept sentiment cautious.

U.S. President Barack Obama and Republican candidate Mitt Romney are engaged in frantic last-minute campaigns in swing states. A Romney victory may weigh on gold prices as hopes for further monetary easing may dim, hurting prospects for bullion.

Investors are also waiting for the once-a-decade leadership transition in China, with expectations for clearer economic policy direction once a new leadership team is in place after the 18th Communist Party Congress, which is scheduled to open on Thursday.

“Clients are holding back ahead of the U.S. election,” said Brian Lan, managing director at GoldSilver Central Pte Ltd in Singapore, adding that the recent price dip in gold had attracted retail investors in the region.

But some traders said the election result would only have a short-term impact on market sentiment, as it was unlikely to lead to immediate changes in U.S. economic prospects.

The latest data showed that the expansion in the vast U.S. services sector slowed slightly last month, suggesting growth in the world’s largest economy would remain modest, while activity in China’s services industry also waned.

“It is more sentiment-related, since the stimulus measures already announced by the Fed can’t be taken back and the election result won’t change the economy overnight,” said a Shanghai-based trader.

Uncertainty over the euro zone’s debt crisis lingered, with Greece’s new austerity package greeted by strikes and protests.

Holdings of gold-backed exchange-traded funds stood at 75.074 million ounces by Nov. 4, just a touch off the historical high of 75.086 million ounces marked in late October.

“Silver could test $30 or even below in late November and December, as physical demand is poor and the situation in the euro zone is still quite bad,” said the trader in Shanghai.