Reuters/Nakul Iyer
Gold holds firm as Biden leads in White House race

Gold held firm in a narrow range on Thursday as investors were cautiously optimistic Democrat Joe Biden would edge past President Donald Trump in a tight race to the White House.

Analysts expect Biden to likely enact larger stimulus measures than his Republican incumbent, even as chances of a divided Congress could stymie Biden’s fiscal policy efforts.

Gold tends to benefit from widespread stimulus measures as it is widely viewed as a hedge against inflation and currency debasement.

Spot gold rose 0.3% to $1,909.41 per ounce by 600 GMT.

U.S. gold futures gained 0.7% to $1,909.80 per ounce.

“It’s likely Biden will secure a presidential victory and this has boosted confidence as a democratic president may point to a bigger stimulus,” said Margaret Yang, a strategist with DailyFx, which covers currency, commodity and index trading.

Biden on Wednesday predicted victory after winning two critical U.S. states, while the incumbent president Trump alleged fraud, filed lawsuits and demanded recounts.

“Gold traders are not excited about this outcome,” DailyFx’s Yang said, noting a contested result could mean a smaller fiscal stimulus plan.

Meanwhile, the dollar pulled back from strong gains in the previous session, making bullion cheaper for those holding other currencies.

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CNBC/Patti Domm
Fed wants low profile but may repeat that the economy needs stimulus

The Fed’s two-day meeting is expected to end Thursday with no new proclamations from the central bank, and Chairman Jerome Powell will be sure to distance himself from the election uncertainty.

But he is likely to be asked about one of the most pressing concerns in markets — fiscal stimulus to help the economy recover from the effects of the coronavirus. That topic has been a political hot spot, and it could be resolved in several ways depending on how the election turns out.

“With a GOP Senate majority, the expectations for stimulus is absolutely getting dialed back, which is a good part of why yields are plummeting the way they are,” said Julian Emanuel, equity and derivatives strategist at BTIG. The 10-year Treasury yield went from a high 0.94% Tuesday night to about 0.75% Wednesday.

Strategists say the Fed will not address the election, which was unresolved as of Wednesday afternoon with the outcome in several key states uncertain.

Powell is likely to be asked about the need for fiscal stimulus, which Congress failed to provide ahead of the election. On Wednesday, Senate Majority Leader Mitch McConnell reopened the topic, saying it would be important to pass a package before the end of the year.

“Powell himself has made very clear that the most important thing is getting cash into people’s hands. I think he has to [comment], and I think it may be a market negative, given the fact that kind of rhetoric reinforces the limited effectiveness of the tools in the Fed’s tool box,” said Emanuel.

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Forbes/Sarah Hansen
Markets Lose All Hope For Big Stimulus With Election Outcome Still Unclear

As the prospect of a Democratic sweep, or “blue wave,” in the 2020 election shrunk overnight, financial markets—which have long priced in a Biden victory—backtracked on much of their early optimism for a political environment that could produce another massive stimulus bill.

Early in the evening, certain futures contracts surged as traders anticipated a win for former vice president Joe Biden.

Futures contracts on the Dow and S&P 500 dropped sharply overnight as the race appeared to narrow, with President Trump gaining ground in Texas and Florida amid increasing uncertainty that Democrats could gain control of the Senate.

After reaching levels not seen since June, yields on the ten-year U.S. Treasury bill dropped ten basis points as the race tightened and more investors flocked to the safe-haven asset.

Tech-heavy Nasdaq futures, on the other hand, stayed in the green all evening, reflecting the market’s new bet on diminished regulatory pressure on the sector that would accompany another Republican-led Senate (a Democratic-controlled Senate is widely expected to attempt to curb what it would see as tech monopolies).

Speaking to CNBC on Wednesday morning, Mohamed El-Erian, chief economic adviser at Allianz, said this market behavior is consistent with three expectations: the lack of a major economic breakthrough (whether through another major fiscal stimulus package or other means); the fact that Federal Reserve needs to provide more support to the economy (especially in the absence of more relief legislation); and pessimism that the United States can get the coronavirus under control in the near future.

“The Senate is not going to allow this to happen,” El-Erian told CNBC, after being asked whether investors were expecting major tax changes should former vice president Joe Biden win the presidency. “At least for two years, we’re not going to have major economic initiatives, absent a crisis.” In other words: Even if Biden wins the presidency, a Republican-controlled Senate will make it extremely unlikely that major tax changes will come to pass. A Republican-led Senate could also mean that another fiscal stimulus bill on par with the $2.2 trillion CARES Act is unlikely to pass—even under a Democratic president.

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