If you have been following my thoughts and posts on Gold over the past days, you would have heard me saying that the outlook for the relic appears to be determined by the fate of the stimulus package as well as the size.
And given the Reps are non cooperative in doing everything possible to deny the Dems from winning anything, the prospect of the stimulus still hangs in the balance. So this comes down to firstly when Trump concedes and paves way for the transition of Biden's administration to move the needle on the stimulus negotiation. Secondly, down to the Georgia Senate race, a win for the Dems there would be a big win for a large stimulus prospect and therefore precious metals. So between now and Jan, until the Georgia Senate outcome is known, Pelosi is unlikely to get her $2T stimulus that would boost the metals and the best she would get is probably below $1T, but given that she was reluctant to accept it before the elections, there is clearly no chance she would accept it now given that the Dems now have won the Presidency. So it will still be a stalemate possibly until Jan and market participants who favour Trump but want gold to be higher would have to hope for a Dem Senate victory*. Gold badly needs Perdue and Loeffler to lose in the Georgia senate race run-off.
But there is a possible silver lining with this Congress gridlock. And it is the Fed Jerome Powell who may decide to undertake a big QE initiative in the absence of a fiscal stimulus although that money would flood into the markets but not into the hands of the public (man in the street). Whether and when Powell would act unilaterally and sizeably is anyone's guess but more likely when the gridlock starts to threaten the US economy into a possible double dip scenario. After all, the President has lost all interest in managing anything anymore other than playing golf and checking on his legal pursuits. And the recent disagreement between Powell and Mnuchin only increases that prospect somewhat.
Political uncertainty nor worsening COVID have not been able to move the gold needle , it needs a political fix.
* I have not given my take on who is likely to be the victors in the Georgian senate race but if the Georgian black grassroot movement is doing the superb job it did, the odds of at least one Georgian senate seat is rather likely (by the way Georgian Rep contender Kelly Loeffler tested positive for COVID)
