【TOP 1 Morning】Gold rises as pandemic worsens, U.S. stock market rebounds ahead of election day

Yesterday Market Review

Gold

Gold prices gained on Monday on uncertainty surrounding the outcome of Tuesday’s U.S. presidential election, while a spike in global coronavirus cases exacerbated fears about an economic recovery, further boosting the safe-haven metal’s appeal.

The spot gold closed at $1893.42 per ounce, volatility within the day is $1891.61-$1896.02.

“We are expecting an increase in volatility coming in the next 72 hours. So, because of that, people are looking at gold and silver as safe-haven play,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

Democrat Joe Biden is leading U.S. President Donald Trump in national opinion polls, but the race is tight in several battleground states, with fears that the results may not be clear on Tuesday night as ballot counting could take days.

“If the results are not clear, we can go back to $1,940 an ounce. But regardless of which candidate wins, there are underlying pieces of continued stimulus, central banks are expanding balance sheets, interest rates are remaining low for extended period of time,” Streible said.

The silver closed at $24.057, volatility within the day is $23.371-$24.144.

Forex

The U.S. dollar hit one-month highs against a basket of peers on Monday, and expected volatility in major currencies rose to the highest levels since April on investor jitters over the outcome of Tuesday’s U.S. presidential election.

U.S. dollar closed at 94.065, volatility within the day is 94.032 - 94.062.

The dollar has strengthened in the past week as risk sentiment has soured, with investors reducing positions due to uncertainty over the result.

“The move we saw last week was a pretty broad derisking and I think that makes a lot of sense; people are naturally skeptical about any sort of prognostication with regards to the election after what happened four years ago,” said Erik Nelson, a macro strategist at Wells Fargo in New York.

“The closer the election is, the more likely it is to be delayed or contested and that’s the perfect storm for risk assets to go down,” Nelson added.

One-week implied volatility gauges for the euro and the yen were both above 11%, the highest since the beginning of April.

A surge in global coronavirus cases also weighed on sentiment. In Europe, new COVID-19 cases have doubled in five weeks, a Reuters tally showed, with total infections surpassing 10 million.

The British pound also weakened after Prime Minister Boris Johnson announced over the weekend a one-month lockdown across England.

Sterling fell as low as $1.2852, the lowest since Oct. 7. It was last trading at $1.2904, down 0.29% on the day.

The Federal Reserve will conclude its two-day meeting on Wednesday. U.S. jobs data for October is also in focus on Friday.

Stock Market

The Dow and S&P closed higher on Monday, with the Nasdaq posted slimmer gains on the eve of the U.S. presidential election.

The Dow Jones Industrial Average rose 423.45 points, or 1.60%, to close at 26,925.05. The S&P 500 rose 39.80 points, or 1.22%, to end at 3,309.76 while the Nasdaq Composite rose 46.02 points or 0.42% at 10,957.61.

Apple announced that it would hold an event on Nov. 11, where the company is expected to unveil new Mac computers that feature processors Apple-designed in house. Shares of Apple were little changed following the news and have lost roughly 0.4% on Monday. 

The blue-chip S&P 500 closed higher by 1.2%, having lost 5.6% last week in what was the index’s worst weekly performance since March. Leading the index were stocks in the basic materials and industrials sectors, as investors bet these areas would benefit from the increased infrastructure spending pledged by Mr. Biden, should he become president.

The tech-focused Nasdaq, which started the session more than 1% higher, fell back to a 0.4% gain for the day. Analysts believe a blue-wave victory, where Democrats take control of both houses, could usher in more regulation of big tech businesses such as Facebook and Google.

“It is hard to say whether this is a bet on sector rotation, an institutional driven bet today, or if this is more traders speculating on what might happen tomorrow,” said Peter Giacchi, Head of DMM Floor Trading at Citadel Securities in New York.

“The longer this plays out over the course of the week if it takes that long, the more volatility we would expect.”

Crude Oil

Oil prices gained more than 2% Monday, shaking off earlier losses, as the United States heads into a contentious U.S. presidential election.

The oil market has been under pressure in recent days, hit by concerns about weaker fuel demand as several European countries went into lockdown to curb the coronavirus. New infections spiked in the United States as well.

West Texas Intermediate crude settled at $35.810, volatility within the day is $35.367-$36.736. International benchmark Brent crude closed at 37.853, volatility within the day is $37.454-$38.732.

“The concerns over oil supply and demand fundamentals are going to play second fiddle to the U.S. presidential election and to how risk markets will react to the outcome,” said BNP Paribas analyst Harry Tchilinguirian.

Countries across Europe have reimposed lockdown measures to try to slow COVID-19 infection rates that have accelerated over the past month.

Global oil trading companies and analysts expect further demand destruction because of the resurgence of virus cases, though estimates differ.

“The lockdowns will stunt economic recovery in the short-term and in the long-term, and the pandemic will also leave behind a legacy of behavioral changes that will also affect oil use,” said Rystad Energy’s Artyom Tchen.

Focus Today

11:30(GMT+8): Australia RBA Interest Rate Decision, Forecast:0.1%, Previous: 0.25%;

16:00(GMT+8): Eurogroup Video Conference;

23:00(GMT+8): United States Factory Orders MoM (SEP),Forecast:1%, Previous: 0.7%;

23:00(GMT+8): United States ISM Manufacturing PMI (OCT) Forecast:55.8, Previous: 55.4;