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Gold Price Analysis: Key Gold Levels to Watch Amid Georgia Senate Runoff Risk

Gold Price Analysis: Key Gold Levels to Watch Amid Georgia Senate Runoff Risk

Justin McQueen, Analyst

Gold Price Analysis & News

  • Gold Breakout Extends on Haven Bid
  • Georgia Senate Runoff Election Preview
  • Gold Technical Levels to Watch
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Gold Breakout Extends on Haven Bid

A new year, but the same narrative continues to drive financial markets. 2021 has gotten off to a volatile start as several countries announced tougher lockdown measures, including the UK after UK PM Johnson confirmed a third national lockdown. In turn, markets were on the defensive as US equities posted modest losses to begin the new year, while safe-haven flows were seen in gold, which exacerbated the technical breakout, which saw the precious metal post its largest daily gain since November 5th.

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Gold Posts Strongest Daily Gain Since US Election (Daily % Change)

Gold Price Analysis: Key Gold Levels to Watch Amid Georgia Senate Runoff Risk

Source: Refinitiv

Georgia Senate Runoff Election Preview

In other news, politics looks set to dictate financial markets for the next 24-48 hours with the Georgia state runoff election. As I mentioned yesterday, this will be key for markets, given that this will impact how much of Biden’s policies can pass through Congress, thus being the last throw of the dice for a blue wave over the next 2 years.

State of Play: As things stand, Republicans currently hold 50 seats to the Democrats 48 seats, while 2 seats in Georgia were left unfilled after both candidates failed to reach 50% of the votes. According to recent polling data, support for Democrats look to have picked up with both candidates showing a slight lead of 1.8 and 2.2ppts. If Democrats win the runoff elections, the extra two seats would give them control of the Senate as a 50-50 tie would give VP-Elect Kamala Harris the deciding vote. However, Republicans need to win just one seat to maintain control of the Senate.

Timing of Results: Polls will close at 00:00GMT/1900ET, however, the timing of the results will largely be dependent as to how close the race is. As a reminder, Georgia did not declare a winner in the presidential election until several days after the election.

Blue Wave Trade: Ahead of the US election the consensus view of a blue wave trade had been a weaker USD, higher rates and equities. However, while the view remains that the USD could slide further, it is worth keeping in mind that the USD is already down circa 5% since the election. Perhaps the clearest trade would be for US Treasuries to weaken with yields tilted for a break of 1%. On the equity front, however, there is a possibility of an initial move lower in US tech stocks, given that a blue wave would likely see a repricing on higher corporate tax and tech regulation risks. That said, the event has become much more binary amid the recent shift in favour of Democrats.

Democrats Tighten Gap in Race for Georgia Senate Seats

Gold Price Analysis: Key Gold Levels to Watch Amid Georgia Senate Runoff Risk

Source: PredictIt

How to Trade the Impact of Politics on Global Financial Markets

Gold Technical Levels to Watch

The Senate race will also be closely watched for gold traders, given that a blue wave scenario would likely push real yields further into negative territory and thus underpin the precious metal. With yesterday’s breakout following the trendline breach, initial topside is seen at 1965 (COVID vaccine peak) with the September double-top just ahead at 1970-75. On the downside, support resides at 1930-35, while failure to hold puts 1900-05 in focus.

Gold BULLISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 4% 8% 4%
Weekly -3% 14% 0%
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Gold Price Chart: Daily Time Frame

Gold Price Analysis: Key Gold Levels to Watch Amid Georgia Senate Runoff Risk

Source: Refinitiv

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