GOLD- Challenge the psychological threshold of $2,000.

The greenback’s recovery has curbed gold’s rebound. In fact, gold’s decline was even steeper proportionally than the dollar’s recovery, highlighting the difficulties bullion to climb above and even to hold onto the key level of $1,920. This area, firstly reached in 2011 and for almost a decade the record high for gold, is now the first real resistance for bullion. Moreover, we can also see that at $1,880-$1,885 buyers started to react and pulled the spot price back up to $1,890-$1,900. This is important as bullion, at least for the time being, didn’t fall to $1,850-$1,860, which is a major support to monitor. In other words, we are still in a wide lateral phase, in the trading range between $1,850 and $2,070. Bullion will need to break through $1,920 to have the chance to once again challenge the psychological threshold of $2,000.

FOREX- Demand for dollar-denominated assets increases

A series of medical setbacks in the fight against COVID is hindering risk appetite resulting in the continuation of dollar gains against the other major currencies for the second day in row. In a pattern observed since the beginning of the pandemic, demand for dollar-denominated assets increases whenever fear drives investors away from riskier instruments. However, the greenback’s gains are to some extent subdued and counterbalanced by optimism about the release of an economic stimulus package and the outcome of the American presidential election, with polls indicating an increasing likelihood of a Joe Biden victory by a clear margin, avoiding the nightmare scenario of a disputed result.

EUROPEAN SHARES-Investors may choose to temper their exposure

Shares drifted lower at the beginning of the European trading session on Tuesday as market sentiment remains weighed down by increasing uncertainty, despite encouraging Chinese data overnight. Investors’ risk appetite is on hold today following delays and difficulties in the development of a vaccine from Johnson & Johnson, while infection numbers keep on increasing everywhere. In addition, stock traders are becoming ever more disappointed by the failure of the US administration to deliver a new deal on further stimulus measures and must deal with the uncertainty of the upcoming presidential election. Having said that, and after yesterday’s rally on techs, many investors may choose to temper their exposure to stay on the “safe side” ahead of the earning season and its usual higher market volatility. With this in mind, investors’ attention will be focused on the financial sector with Citigroup, JPM and Blackrock all publishing their results today. There is unlikely to be any significant sell-off today as tech stocks are likely to offset any losses in the travel and leisure sector triggered by vaccine delays.

OIL-Investors are waiting for oil industry reports

The countdown to the US election is drawing into sharper focus and as the odds of a Biden victory increase (implied probability went up from 65 to 69.2% over the weekend), investors are betting on the likeliest scenarios for oil in the next few years. A Biden victory could see less support for the shale oil industry, pulling up the oil price as a result. Vice versa, if Trump manages to defeat forecasts, shale oil would probably benefit from the tycoon’s help. Despite this, Trump could be supportive for the barrel through any potential new stimulus, which could boost (or drug?) the economy further.

From a technical point of view, WTI remains just below $40, after the price slipped yesterday. Investors are waiting for oil industry reports due out today to provide new directionality to the price.

FOREX-Risk aversion is the prevailing sentiment

Risk aversion is the prevailing sentiment for financial markets early on Tuesday, with the main stock indices in Asia and Europe in the red and US futures pointing in the same direction. It is therefore hardly surprising that the dollar has recovered some of the ground lost over the last few days, after hitting a 3-week low versus other major currencies on Monday. The greenback’s gains versus risk-related currencies result from a setback in the development of a Covid vaccine by Johnson & Johnson, the continued stand-off between bipartisan lawmakers in Washington preventing the approval of an economic stimulus package plus a new addition to the party in the shape of a fresh dose of Chinese assertiveness banning the import of several key commodities from Australia. The latter factor reminds us that the latent trade and tech conflict between the Asian giant and Western economies continues to cast a shadow over global economic growth perspectives.

GOLD-Investors are waiting for new market movers

Gold is consolidating after Friday afternoon’s sharp rally with investors waiting for new market movers. Although this could be a crucial week for Brexit, this doesn’t seem to be an important issue for bullion with news from central banks and US politics much more likely to trigger movements. We are in a wait and see scenario, as investors try to understand what is going to happen in early November with the US election and the subsequent reaction of both stocks and currency markets. Technically gold is regaining strength with the consolidation above $1,920 a supportive signal for bullion and confirming traders’ huge interest.