BLBG:Gold Gains for 2nd Day as Dollar Weakens Before U.S. Vote
Gold rose for a second day in London as the dollar weakened before the U.S. presidential election that may determine the direction of monetary and fiscal policy in the largest economy.
U.S. voters decide today between giving President Barack Obama another four years in office or changing course with Republican challenger Mitt Romney. The Fed said Oct. 24 it will maintain $40 billion in monthly purchases of mortgage debt and probably hold interest rates near zero until mid-2015. The U.S. dollar weakened against a six-currency basket.
“An Obama win would be the best case scenario for gold, both from its implications for both monetary and fiscal policy,” Edel Tully, a London-based analyst at UBS AG, said in a report today. “If Romney wins, we expect gold’s knee-jerk reaction to be negative, and we look towards $1,647 for initial support, the Aug. 31 low, with the potential for a deeper follow-through.”
Gold for immediate delivery advanced 0.3 percent to $1,690.78 an ounce by 10:16 a.m. in London. Gold for December delivery rose 0.5 percent to $1,691 an ounce on the Comex in New York.
Gold futures may initially rally to $1,725 an ounce before further gains if Obama wins, according to UBS. They jumped 4.2 percent on Nov. 4, 2008, the day Obama was elected, and more than doubled during the four years of his presidency.
Election Aftermath
Bullion’s rally may be at risk if Romney wins as he may replace Federal Reserve Chairman Ben Bernanke at the end of his term and easing may end earlier than expected, Francisco Blanch, commodities research head at Bank of America Merrill Lynch, said yesterday. UBS’s Tully said Romney’s election may lead to a united government and stronger dollar, hurting gold.
Bullion rallied 8.1 percent this year as central banks including the Federal Reserve took steps to shield their economies hurt by Europe’s crisis.
Silver for immediate delivery rose 0.6 percent to $31.3675 an ounce. Spot platinum advanced 0.4 percent to $1,548.74 an ounce. Palladium added 0.3 percent to $614 an ounce.
To contact the reporters on this story: Maria Kolesnikova in London at mkolesnikova@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net
To contact the editor responsible for this story: John Deane at jdeane3@bloomberg.net
