Gold, Oil Outlook: US Elections, FOMC, and Possible Domino Effects

Key Events

• Republican win: positive market volatility?
• Democratic win: stable / negative market volatility?
• ISM Services PMI: expected to kickstart the week’s volatility
• FOMC meeting (Thursday)

Analyzing market movements from a comparative perspective, a Republican win is generally expected to boost the dollar and markets more than a Democratic win. Similarly, a 25-bps rate cut is viewed as a positive easing decision compared to a larger 50-bps cut. With the following factors on the table, what are the possible effects on oil and gold?

Gold Outlook

Gold’s rally, driven by inflation, geopolitical tensions, and overall market uncertainty, may be reaching a point of correction. Both monthly and daily charts reflect overstretched momentum, suggesting a possible pullback. With gold and indices hovering near 2024 highs, any trigger could initiate a domino effect, heightening volatility across global markets amid existing economic and political caution.

Quantifying uncertainties with technical analysis

Gold Outlook: Monthly Time Frame – Log Scale

Source: Tradingview

According to the broader chart view, gold may have reached a peak, with the RSI and price action meeting the target of an inverted head-and-shoulders pattern. This suggests a potential momentum recharge or pullback to the $2,680–$2,670 zone. If a deeper pullback occurs, additional support levels may emerge at $2,600, $2,540, and $2,480.

On the upside, a firm close above $2,800 could extend the rally toward $2,890 and $3,050.

What about Oil?

Oil Outlook

Click here for the full: Crude Oil Election Outlook

Oil remains range-bound, just above the December 2021 support, as Middle East tensions and oil production quotas create a balancing act. The possibility of increased supply from OPEC and IEA’s forecasted demand drop are key factors, with OPEC’s recent hints at delaying production hikes helping to keep oil above the $64–$65 support range.

A breakout from the $72.30 resistance or $65 support level is needed to confirm the next directional move. A Trump victory may introduce a more aggressive approach to energy policies, impacting supply quotas, geopolitical stances, and OPEC relations, potentially raising volatility.

Quantifying uncertainties with technical analysis

Crude Oil Outlook: Weekly Time Frame

Source: Trading view

Removing all the fundamental noise, a firm close below $64 support would likely extend oil’s primary downtrend since 2022, with further drops towards $60, $58, and $49.

Conversely, a firm breakout above $72.30 can support the trend towards the upper border of the primary downtrend between resistance levels $80 and $84 before confirming a longer-term bull scenario.

--- Written by Razan Hilal, CMT on X: @Rh_waves