The gold market may see some tough sailing ahead. A smooth presidential transition hopes for the COVID-19 vaccine and an accommodating Fed could all keep investors’ eyes on the equity markets while lessening the desire for perceived safe haven asset classes such as gold. With just a few short weeks left in the trading year, investors may become increasingly likely to hit the “sell” button as the end of the year approaches.

 

A weaker dollar, geopolitical concerns and the ongoing viral pandemic could all keep buyers eyeing gold, however, and the metal’s declines may be limited in nature. With the trend on the daily chart now turning bearish, the next major test for the bulls could come as the longer time frames-the weekly and monthly charts-try to flip lower as well.

 

The next several months may hold the keys to gold’s fortunes as the Biden presidency gets going in January. Although it has been said that democrats are bad for business and want higher taxes, the stock market has thus far responded favorably to the Biden win. This is perhaps due to the certainty surrounding the win and investors may simply be cheering on the fact that there is no contested election result that may drag on for weeks or months and hold up the new administration’s taking office. Despite President Trump’s complaints and political bantering, it seems as if most voters are quite confident in the Biden victory and do not see any reason to be concerned about the election being overturned or otherwise invalidated.

 

The demand for safe haven asset classes appears to remain, however, as Bitcoin recently made a fresh all-time high. The digital currency’s run has been impressive, although bumpy. Whether Bitcoin and other cryptocurrencies are positioning themselves to take gold’s place as the alternative asset of choice remains unclear. Further interest in cryptocurrencies and higher values could, however, detract from investor interest in gold and other precious metals. This theme may be played out in the coming months and years. Despite Bitcoin’s comparatively higher price, it still cannot be held in one’s hand and many investors may lack the comfort needed to hold it over the long-term.

 

Also acting as a potential market catalyst, the outgoing Trump administration could potentially levy further sanctions against Chinese companies before leaving office. Any further U.S./Chinese economic issues or disagreements could pave the way for equity market pressure. With many unknowns surrounding the trading relationship between the globe’s first and second-largest economies, any further ruffling of the feathers could be viewed as bearish and could fuel risk aversion. That, in turn, could lead to buying in the gold market as investors seek out safety as stocks presumably weaken.

With the bears now in control of the daily price chart, a test of the $1700 level on the downside could be seen in the weeks or months ahead. The bulls need to take prices sharply higher, for a close above resistance around $1850, to gain further bullish momentum.

Over the last weekend, news media determined that Democratic candidate Joe Biden had won the U.S. Presidency. After waiting since Tuesday for election results, the population and investors were extremely pleased to hear that a result had been reached. Markets opened the week up sharply, with the benchmark Dow Jones Industrial Average finishing higher by over 1000 points.

 

That optimism may last or prove to be short-lived, however, as President Donald Trump has refused to concede defeat in the election. Trump has also implemented the legal system in what he has described as a fraudulent election process and a long, bitter battle in the courts could potentially be in store.

 

Although it seems there is little, if anything, that Trump and his allies can do to change the election results, an ongoing battle against those results has the potential to wreak havoc on U.S. and global financial markets. Markets have stood strong since the election, however, and investors appear to be quite comfortable with the results as they currently stand. Even the stock markets, which many had suggested would “tank” on a Biden victory, have remained strong and likely to move higher. The Biden victory could put further government stimulus at the front of lawmakers’ minds, and a significant amount of capital could be seen coming from the government as the nation and world continues the fight against the COVID-19 virus.

 

The viral pandemic has taken a turn for the worse in recent weeks and now appears to be enjoying the benefits of exponential mathematics. The United States recently crossed the 100,000 cases per day threshold, a level which was warned of previously by Dr. Anthony Fauci. The ongoing spread of the virus may necessitate another economic closure in the U.S. and elsewhere. Some nations, such as Italy, have already begun to implement fresh closures that will have a lasting impact on their economies as well as the global economy.

 

As the days dwindle down until Biden assumes office, worries over another large-scale closure may intensify and could provide the only major roadblock to higher equity markets. President Trump could also, however, force closures before his term expires in January. Trump taking further action against the virus seems unlikely, however, as he has consistently discussed remaining open and not allowing the virus to dictate life in the country.

 

The gold market recently saw some significant selling pressure, declining by nearly $100 per ounce in a single session. That sell-off has seen the price of gold drop to under $1900, a previous support level. The bulls may now have their mettle tested as the bears have seen some lower price action and as stocks and the dollar potentially rally further.

 

The September lows around the $1851 region may now prove to be a key support level, while the bulls need to maintain recent prices or establish a new trading range to maintain control of the daily chart. Tuesday’s highs near $1890 may act as first resistance followed immediately by resistance at the $1900 level.