Gold Traders Looking for a Dip, In Order to Buy

Gold bullion prices rallied to a one-week high at $1,726.25 per troy ounce in Thursday trading, though the precious metal finished out October with a monthly decline of 3.1 percent.

Silver bullion gained to $32.66 per troy ounce, also up on the week, as oil and copper rose and U.S. Treasury bonds fell.

The spot price of gold is trading roughly 3 percent lower than its start in October and is expected to finish the month in the first monthly loss since May as U.S. investors sit out the market before the U.S. presidential elections next week.

A note from UBS said there are those who are still looking for another dip, perhaps one that offers an opportunity to jump in sub-$1,700, between now and year-end. It added the clear downtrend from earlier in the month has now been replaced by this consolidation phase but the possibility of another attempt on the downside certainly cannot be ruled out.

A trader in Singapore told Reuters this morning there are a lot of event risks in the gold market including non-farm payrolls, the U.S. election, a change of power in China, and the routine policy meetings of various central banks.

UBS analyst Dominic Schnider said people wonder if Romney is going to be in power and what kind of monetary policy he will have. Schnider added that the Republican candidate would likely replace Ben Bernanke, the current chairman of the Federal Reserve, as he is clearly not in favor of what the Fed is doing.

The Financial Times published an article yesterday arguing that a change in Federal Reserve leadership following a Romney win would be bad for bullion prices as the U.S. dollar would strengthen.

However a note from Standard Bank currency analyst Steve Barrow said there’s no indication Republicans or Democrats are better or worse for the health of the U.S. dollar. He added that if Obama narrowly hangs on to the presidency and loses the Senate, it would probably produce the worst possible knee-jerk response in the dollar, and cause great volatility in precious metals markets.

Prior to the U.S. election, which is currently neck and neck between Obama and Romney, the biggest influence in precious metals markets is the U.S. non-farm payrolls, which is due out Friday.

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