As the trading gets underway for the new year, several key themes are likely to drive price action. Some of these themes have already made themselves evident, while others have yet to garner significant attention.

The gold market may look to stabilize in the near-term and to give the bulls more reasons to buy. Recent downside deflated much of the market’s hot air, although much of that warm air can be quickly replaced under the right circumstances.

The nearly-$70 per ounce decline seen in gold to end last week took the market below its key 200-day moving average. Although there could be several reasons for the severe decline, some analysts have suggested that Bitcoin could have been a primary culprit for gold’s sell-off. On Friday, Bitcoin breached the $40,000 level on the upside for the first time ever, and many would-be gold buyers could have found themselves wanting to exit gold and get involved in Bitcoin or other crypto-currencies.

Of course, things can and do change fast, often times too fast. Monday’s decline of 20 percent in Bitcoin may have eroded much of the market’s recent allure, and some or even much of that capital could find its way back into the gold or precious metals markets. A fresh infusion of investor interest and capital could steer the yellow metal higher again, while smoothing market volatility.

While interest rates, the economy and Bitcoin can all have a significant impact on the gold market, investors are also likely to keep their eyes open on President Trump. As time winds down on the Trump Administration, concerns appear to be growing that Trump has become unhinged, detached from reality and could pose a serious danger to national security. Democrats plan on voting on Trump’s second impeachment this week
and appear to be in a hurry to get him out of office as quickly as possible.

Last week’s violence and destruction at the nation’s capital provided a clear indication of what could potentially occur as the country gets ready for a transfer of power. Recent reports on Monday suggested that armed protests could be set to take place in the U.S. on the 17th. Any protest, in any location, runs the risk of violence. If things do get out of control again, the consequences could be severe. The uncertainty surrounding the upcoming transfer of power could keep gold and other metals well-supported as investors seek out their perceived safety.

The incoming Presidential administration may also prove to be bullish for gold and metals. As Biden takes power, the U.S. could possibly look to increase government spending and stimulus measures in order to fight the ongoing viral pandemic. Further spending could not only lead to a sharply weaker currency, but could also fan the flames of inflation down the road. With the U.S. Federal Reserve ready to hold rates low for some time yet, the risk of accelerating inflationary pressures may rise substantially in the months ahead. A quick and significant rise in prices could lead to even more buying in gold and other hard assets, possibly providing them the fuel needed to break out to fresh highs on the upside.

The gold market started this trading week off on the right foot, adding nearly $30 per ounce for the session. The buying was likely based on a slight increase in global risk aversion as well as some positivity on the daily chart.

The stress of the ongoing COVID-19 pandemic continues to wreak havoc on the healthcare system as more than 100,000 have now been hospitalized in the U.S. due to the virus. Although hopes for a vaccine have likely led to some buying in equities in recent weeks, the vaccine is not likely to be distributed on a widespread basis for some time yet. It could still be many months before the vaccine is made available to the general public. That fact, along with the upcoming holidays, could make for some very rocky times ahead. Some have suggested the worst of the pandemi8c is still yet to come, and with many people wanting and even planning to get together over the holidays, American hospitals could see a massive influx of cases in the weeks approaching.

In addition to the ongoing viral pandemic, markets are also worried over the possibility of additional U.S. sanctions against China. The U.S. is reportedly ready to slap sanctions on some Chinese officials in response to China’s crackdown on Hong Kong protestors. Any further sanctions could invite a response from China, and the global trade scenario could take a rapid and significant turn for the worse if the globe’s first and second-largest economies continue their war over trade. As if the global trade situation was not enough, investors are also becoming increasingly worried over Brexit, as chances of a no-deal Brexit appear to be on the rise.

On the other hand of all of this, U.S. lawmakers appear to be making solid progress on another stimulus plan that could total nearly $1 trillion. In another sign of economic positivity, the Chinese economy has continued to impress. The nation reported their largest rise in exports for several years and has apparently overcome the virus more rapidly than the U.S. The strong Chinese economy could potentially keep demand for gold bullion on the rise and may even keep the global economy out of recession if all remains equal.

The U.S. Dollar has also been a major catalyst for gold prices and the Dollar Index saw a bit of a bounce today. After hitting a 2.5-year low last week. Further dollar weakness could keep the gold and metals markets from moving much lower while maintaining a bullish bias over the long-term. Current U.S. monetary policy may keep the dollar on the defensive and the greenback could see a significant decline if long-term support on the chart fails.

Today’s outside-day up has leveled the playing field between market bulls and bears. If the bulls are able to maintain recent momentum, they could look to challenge the $1900 level. If the bears begin to take control again, however, the market could potentially sink towards the $1800 level. A breakdown below this area would inflict significant chart damage and could even lead to a reversal in the long-term trend.

This week could be a critical one for the gold market as numerous issues could come to a head. The yellow metal began the trading week losing gains seen in overnight action as a new vaccine for COVID-19 was reported to be nearly 95% effective. Traders and investors eagerly stepped in to buy the dip, however and drove the market back above the unchanged line. Both a weaker dollar and stronger crude oil prices also affected the yellow metal today, helping to keep prices from falling.

The new Moderna vaccine is said to be 94.5% effective and only requites standard refrigeration compared to the intense cold required by the latest vaccine produced by Pfizer. With some 11 million virus cases and hospitals that are quickly reaching or already at capacity, news of an effective vaccine could not arrive fast enough. Although it may take several months for the vaccine to become widely distributed, some investors are already looking towards life getting back to normal in the year ahead.

The vaccine news sent stocks sharply higher, and equity markets finished the day at their highs for the day. The strength seen in stocks recently could pave the way for more upside ahead, and alternative asset classes such as gold could see investors take a breather as they look to participate in equities and risk assets. Any pullback seen in gold is likely to remain shallow, however, as the overall effects of the viral pandemic have yet to be seen. Although the economy may stage a rapid recovery once the vaccine hits and the virus is stabilized, the negative effects of the pandemic could take months or longer to work their way through the global economy. Today’s Empire State manufacturing data are a prime example. The New York Fed reported that manufacturing declined sharply, from an October reading of 10.5 to a November reading of 6.3. The November reading was far below consensus estimates and countered increasing optimism over the global economy in the months ahead.

In addition to the viral pandemic, investors are also watching the President Trump campaign for any further activity on what it has called a botched election. Despite Trump still refusing to concede the election, he has seemingly acknowledged that Biden is the winner. That has not stopped Trump from preventing a smooth transition, however, as his campaign has yet to release the necessary funding for the Biden transition to take place. Without a smooth transition of power, more Americans could be affected by the COVID-19 virus.  Trump’s unwillingness to pass the torch smoothly could cost lives and may increase the pressure on the President to hand over power quietly and without hesitation.

The gold bulls scored a bullish outside day up on the daily chart after today’s action, but have significant work left to do to quiet the market bears. The bulls will look to close prices above the November highs around $1966, while the bears may look to drive prices lower to the November lows around $1850.

The markets are off to a strong start as the U.S. Presidential election rapidly approaches. It seems as if markets have perhaps already priced in a Democratic victory, and there may not be as much volatility as many had earlier predicted.

A Joe Biden Presidential victory could, however, dictate market action across a variety of asset classes in the months ahead. If Biden were to elect to close the economy, for example, stocks could have a tough road ahead and alternative asset classes such as gold could lead the way higher. The dollar could also possibly take another hit if Biden were to order further large-scale stimulus measures to battle the economic slowdown.

Of course, a Biden victory is nothing more than speculation at this point and Trump is still very much in the race. With some analysts suggesting that Biden is now holding a 10-point lead over Trump the day before the election, the biggest market risk could now lie in the election results and whether they are contested. A disagreement over the results could lead to widespread market volatility and selling. It could take weeks, possibly even months, to sift through a contested result to determine the winner. Recent market action would seem to suggest that markets do not necessarily fear a Democratic victory, but rather are more afraid of unclear election results after the vote.

It seems that Trump and the Republicans have already begun to lay the groundwork for legal action following Tuesday’s vote, and such action could take weeks or longer to be processed. If there is no clear winner within the next few days, investors could become increasingly agitated and could begin to sell out quickly. Although such a scenario could pave the way for higher gold and metals prices, it could also lead to a significant sell-off in the asset class as investors may simply become hungry for cash.

Despite the election and its outcome, the gold market appears to be well-positioned to begin another leg higher. Dollar weakness, an easing Fed and worries over the global economy may all keep the yellow metal supported in the weeks and months ahead.

Stocks may have entered a win/win situation. If Biden were to win the election, the markets could enjoy massive amounts of government spending and stimulus measures. If Trump is to win, markets may move higher on ongoing tax relief and a less regulatory business environment. If equity markets do continue their upwards trajectory, it begs the question of what could fuel a fresh rise in the gold market.

The bulls have control of the market on the daily charts, but that control appears to be fading a bit. The bullish camp must first take out the $1900 level on the upside and then must challenge the October highs near $1940 to maintain upside momentum. The bearish camp, on the other hand, will look to push prices lower and to challenge the September lows near $1850.

The gold market is moving higher today to kick off the new trading week as the dollar index comes under some pressure. A bullish technical posture as well as some safe haven buying ahead of the rapidly approaching presidential election two weeks away is also playing a role in Monday’s rise.

The same old factors affecting the yellow metal are still very much in play. Hopes for a U.S. stimulus plan are a bit higher today following Nancy Pelosi setting a Tuesday deadline for an agreement with the White House. The President has said that he is closer to the Democrats’ desire for a larger overall package than Congressional Republicans. The Senate is set to vote on the $500 billion plan on Wednesday and a positive vote could set the stage for a sharp rally in equity markets and risk assets.

Outside of the U.S. Presidential election, the general focus remains on the health of the global economy. China recently reported that its economy grew by 4.9 percent for the third quarter. That figure was below expectations, yet still suggests that the globe’s second largest economy is powering back sharply from economic closures seen just months ago. With new cases of COVID-19 seeing a sharp rise recently, any positive economic news may be considered bullish and may be reflected as such in markets.

China is also taking further steps to cement its place at the head of the global economic table. Recent reports suggested that China passed new legislation over the weekend that could help it keep a key economic advantage over the West. The Chinese Government can now reportedly restrict rare earth mineral exports to foreign nations and their companies. Advanced technologies, such as LEDs, are also impacted by the new legislation. The move by the Chinese Government could force more market players to set up shop in China and could put Western companies and nations at a disadvantage. These measures are the most recent escalation in the ongoing war over global trade and a response by the U.S. and/or other Western nations may be expected.

The U.S. is full of uncertainty with the election quickly approaching and with the battle against the pandemic ongoing. The E.U. is also a source of investor angst, however, as a “hard” Brexit may be becoming increasingly likely. U.K. Prime Minister Boris Johnson stated over the weekend that Britain should prepare for a “hard” Brexit of the European Union does not agree to a free trade agreement. The next couple weeks may be critical in the ongoing saga, as it will become increasingly clear whether the two sides are willing and able to meet each other halfway in order to avoid further economic damage. The unknowns surrounding Brexit may keep the yellow metal well supported in the weeks ahead and could even lead to sharp gains for the metal.

All else being equal, a weaker dollar, weaker economy and uncertainty over the election and Brexit may keep the gold bulls on the offensive in the weeks ahead.