Fiscal stimulus uncertainty as Covid-19 cases surpass forty million worldwide

Although the White House is “cautiously optimistic” that they can reach a watered-down fiscal stimulus deal with the Congress before the presidential election, time is quickly running out. According to speaker of the House Nancy Pelosi a deal must be reached within the next 48 hours if any stimulus package is to be enacted prior to the presidential election.

This is occurring as Covid-19 cases have breached 40 million worldwide with 8,189,710 cases of the virus occurring in the United States. Global loss of life has surpassed 1.1 million with the United States accounting for roughly 20% of the global deaths. According to John Hopkins University of medicine the death toll in the United States is now at 219,950. Given that there are true hopes that a vaccine will be forthcoming, the probability that a viable vaccine will be available this year diminishes as two major developers of the vaccine have paused their stage III trials last week.

In Europe cases of new coronavirus infections are now in a second wave scenario which has resulted in many countries reinstating lockdowns and travel restrictions. Switzerland has implemented tighter restrictions which began on Sunday in attempts to control the second wave of infections that are hitting their country. These restrictions include a nationwide obligation to wear masks as well as a ban on large scale public gatherings. Italy also implemented new coronavirus restrictions as daily cases hit a record of 11,705 new cases on Sunday. Italian Prime Minister Giuseppe Conte in a news conference said that, “The situation is critical. The government is there but everyone must do their part.”

The lack of fiscal stimulus by the United States has resulted in dramatically lower prices in U.S. equities, with the Dow Jones Industrial Average losing 410 points in trading today. This decline amounted to approximately a 1 ½% decline in the Dow. The tech heavy NASDAQ composite lost 1.65%, while the Standard & Poor’s 500 gave up 1.63%.

This also led to a decline in the U.S. dollar which gave up 3/10 % and is currently fixed at 93.40. However, these factors were not highly supportive of gold pricing which resulted in gold futures currently trading unchanged on the day. Gold futures basis the most active December 2020 Comex contract is currently fixed at $1906.90, which is a net gain of $0.50 on the day.

According to the KGX (Kitco Gold Index) spot gold as of 4:59 PM EST was fixed at $1902.80 with traders actually bidding the precious yellow metal lower by $2.80. It was dollar weakness that accounted for over 100% of today’s gains contributing $5.90, resulting in a net gain today of $3.10.

According to our technical studies we see minor support in gold futures at $1900, with strong support at $1880. Resistance begins at $1920 with strong resistance at $1941 which is the 23% Fibonacci retracement of the rally beginning in March and concluding at the record high which occurred during the first week of August.

Wishing you as always, good trading and good health,