Gold Hovers Around All-Time High As US Elections Uncertainty Rises

The US political uncertainty and Middle East tensions seem to underpin gold’s upward trajectory. Gold prices hit a record high on Monday before slightly retreating on Tuesday morning. Demand for silver also continues to rise, pushing the prices of the commodity up for the sixth consecutive day.

Fed’s Daly Says Rate Cuts Should Be Continued

Federal Reserve (Fed) Bank of San Francisco President Mary Daly said that, when it comes to rate policy, the US central bank retains a data-dependent approach but added that more cuts could take place in the next quarters.

Delivering a speech at a Wall Street Journal conference, Daly noted that “so far, I haven’t seen any information that would suggest we wouldn’t continue to reduce the interest rate. This is a very tight interest rate for an economy that already is on a path to 2% inflation, and I don’t want to see the labor market go further.”

The labour market is one of the primary concerns of Fed’s policymakers. Minneapolis Fed President Neel Kashkari said that “we want to keep the labor market strong, and we want to get inflation back down to our 2% target. If we saw a weakening, like real evidence that the labor market is weakening quickly, then that would tell me, as one policymaker, 'Hey, maybe we ought to bring down our interest rate more quickly than I currently expect.”

UBS Says US Elections Volatility Can’t Harm Market

UBS bank analysts said that although some volatility due to the upcoming US presidential elections may be expected, market trajectory would likely remain unaffected.

“As neither party holds a clear advantage in any of the key swing states that could decide the outcome, the race remains too close to call, and we expect volatility to pick up in the coming weeks amid elevated uncertainty. But we also think the potential volatility is unlikely to derail positive equity fundamentals and remind investors not to make dramatic portfolio changes based on expected election outcomes,” UBS economists wrote in their note. Presidential elections in the US are due on November 5th.

Goldman Sachs SP500 Forecast

Goldman Sachs analysts forecast that while the S&P 500 index will continue to grow in the next ten years, its growth rate will likely be significantly lower than it is now.

In a note to investors they suggested: “We estimate the S&P 500 will deliver an annualized nominal total return of 3% during the next 10 years (7th percentile since 1930) and roughly 1% on a real basis. Our historical analyses show that it is extremely difficult for any firm to maintain high levels of sales growth and profit margins over sustained periods of time.”

Goldman Sachs’ economists cited high concentration of investors and capital in the Magnificent 7 group of companies and an elevated starting valuation.

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