The U.S. Comex gold futures dropped $40 last Friday and ended at $1,675.20; the last time gold ended below $1,700 was on Sept. 5. The gold futures rebounded 2.38% on Monday and Tuesday and in the early afternoon of Asian trading, gold futures rose further to $1,724.30, prompted by the re-election of U.S. President Barack Obama. After rising 0.16% and 2.05% respectively last week, the S&P 500 Index surged 1% while the Euro Stoxx 50 Index retreated 0.44%. The Dollar Index rose 0.66% last week and is now trading weaker during Wednesday morning in Asia at around 80.3.
Gold futures plunged below $1,700 last Friday when the U.S. October non-farm payrolls rose by 171,000 compared to the expected 125,000 and the rise of 148,000 in September. Gold traders were concerned that QE3 may end sooner than expected should the labor market continue to recover strongly. Also a Romney presidential win may boost dollar and lead to a more hawkish monetary policy.
There are signs that physical demand for gold has been improving. In September, Chinese gold imports from Hong Kong rose 23% year-on-year and rose 30% from August. Year-to-date to September, gold imports into China from Hong Kong rose from 203,646 kg in the same period last year to 581,848 kg, suggesting investors and institutions have upped the demand for gold in their asset allocation. The Indian consumers are expected to scoop up gold on Dhanteras on Nov. 11, an auspicious day to buy gold. On the trading side, the CFTC non-commercial net positions in gold have dropped in three consecutive weeks, reflecting a cleaner positioning in gold according to Barclays.
Now that the Americans have decided on Obama, gold price is expected to rise further on expectations of more economic stimulus. However, market attention will also turn to the uncertainties caused by the U.S. fiscal cliff totaling more than $600 billion beginning 2013 and the outcome of Greece's vote on the austerity measures on Wednesday.