Investing.com - Gold futures didn't react early to U.S. midterm elections, as expected, but it might play a belated part.
Speculation had been rife in recent weeks that prices of the yellow metal would see heightened volatility ahead of Tuesday's first U.S. national election since Donald Trump became president in 2016.
Yet COMEX gold for December delivery traded in a band of just $11 in the latest session, swinging from a session low of $1,226.60 to a high of $1,237.60 a troy ounce before settling down $6 at $1,226.30. Just a week earlier, the market had jumped twice as much, gaining more than $20 on Nov 1.
"We might actually see a bid in the next 48 hours with some repositioning," said Philip Streible, senior market strategist with oversight for precious metal at RJO Futures in Chicago.
Fawad Razaqzada, technical analyst at forex.com, said a Democratic win of Congress in the election could be big for bullion as "some of Trump’s key policies could face fierce opposition in the remaining two years of his first term at the White House."
"In this potential outcome, we could see both the dollar and possibly stocks sell off sharply, boosting the appeal of the dollar-denominated and safe-haven precious metal," Razaqzada added.
The dollar index, a contrarian bet to gold, was up 0.4% at 96.12 by 2:01 PM ET (19:01 GMT). Currency traders expect the greenback to remain flighty this week ahead of a policy statement expected from the Federal Reserve on Thursday after its monthly meeting.
Despite the threat of higher interest rates, with the Federal Reserve signaling a fourth hike likely in December, gold has managed to stay above the $1,200 level that’s critically-important for the psyche of market bulls. If gold futures break above $1,246, then a rally beyond $1,250 is possible, analysts said.
The protracted US-China trade war has been touted as another pillar of support for gold.
Still, Streible said the yellow metal might not have too many things going its way.
"I think gold prices may have temporarily topped out for now and we're going to start to pull back. The only reason we haven't done so yet is because of this election," he said.
"The fact that we didn't break through the $1,250 level, I think, is going to continue putting pressure on the market. If it is going to rally, it has got to breach the $1,246, but I don't see any catalyst for that at the moment."
In other precious metals trading on COMEX, silver futures fell 0.9% to $14.52 a troy ounce.
Palladium fell 1.9% to $1,100.50 an ounce, while sister metal platinum traded up 0.2% at $871.50.
Among base metals, COMEX copper slid 0.9% to $2.732 a pound.