Metals

Gold slips as likely Republican Senate dents large stimulus hopes

Stacked gold bars at Solar Capital Gold Zrt. in Budapest, Hungary.
Akos Stiller | Bloomberg | Getty Images

Gold prices fell on Wednesday as bets that the Democrats will be unable to take control of the U.S. Senate in the razor-edge American election dashed hopes for a larger U.S. coronavirus stimulus.

Spot gold fell 0.7% to $1,896.02 per ounce. U.S. gold futures settled down 0.7% at $1,896.20.

Prices fell more than 1% earlier in the session as the dollar emerged as the favoured safe haven, with President Donald Trump falsely claiming victory with millions of votes still uncounted in the tight presidential race.

"It's becoming quite expected that the senate is not going to shift towards the democrats and now that we're realistically in a divided government scenario, we're unlikely to get the same type of stimulus that the market was hoping for," said Bart Melek, head of commodity strategies at TD Securities.

Although Joe Biden is tipped to win the election, the Democrats appeared to be falling short in their attempts to take control of the U.S. Senate.

Biden is expected to inject large amounts of stimulus to ease the economic fallout of the pandemic. Gold is considered a hedge against inflation and currency debasement, which are likely to result from a large stimulus.

"But we'll still get something nonetheless. And let's not forget that the Federal Reserve is extremely accommodative. There are other routes to stimulus and not all of them are through the U.S. Congress," Melek added.

The dollar gave up early gains against rivals, while stocks rallied as markets waited for the election outcome.

"As this election process is starting to drag down, we're starting to see that there is a slight edge to a Biden victory outcome and that's why we saw the dollar paring its gains," said Edward Moya, senior market analyst at OANDA.

"We wanted to have election certainty and obviously didn't get that. Everyone is trying to figure out how things are going to unfold and the big risk is that we go to the courts ... that is going to drive the safe-haven demand."

Silver fell 1.4% to $23.84. Platinum rose 0.1% to $867.34 and palladium climbed 0.3% to $2,290.42.