The second round of voting for the US Senate election in Georgia will be held today, and the stimulating election results will directly reveal the allocation of congressional power. The Republicans only need one more vote to retain the Senate, while the Democrats need to win two votes to have a chance of a turnaround.
However, even if the Democrats win the entire Congress, Biden may need varying degrees of Republican support in the Senate to accomplish his priorities. Legislation requires 60 votes to overcome Senate filibusters, meaning that even with a Democratic majority, most bills will require Republican support. An exception is the annual budget reconciliation process; in 2017, Republicans used this process to pass their tax bill with a simple majority.
Currently, many or most Republicans would oppose many aspects of Biden's economic recovery plan. This plan includes tax increases on corporations and the wealthiest Americans, as well as clean energy infrastructure projects (potentially driven by substantial public funds).
Although market sentiment is somewhat tense, analysts point out that the Georgia runoff will only increase uncertainty in the first week, and any significant impact of the election results will be short-lived. Even a landslide Democratic victory won't change the overall market tone. However, the market may still use this as an excuse to establish some positions in advance to prepare for the start of the year.
The emergence of safe-haven demand is also supporting buying in gold ETFs. Holdings in SPDR Gold Shares increased by 1.5%, the largest single-day increase since September. This suggests that actual capital flows are supporting gold as 2021 approaches, and technical levels currently support this claim.
Technically, Gold prices have moved above 1900 and the 100-day moving average, allowing the bulls to temporarily control price movements and potentially push further towards the high of 1960-1965 USD from early November last year.
Economies.com predicts that gold will trade today between a support level of $1928.00/oz and a resistance level of $1960.00/oz. FXTM Chief Market Strategist Hussein Sayed said that the decline in the US dollar at the beginning of the year is also a factor driving up gold prices. Sayed pointed out that the Georgia election will also be extremely crucial for the US dollar, because Democratic control of the Senate will also lead to more stimulus, which will further suppress the US dollar. He added: "With extremely high stock valuations, gold will be an investment that is essential in any portfolio. It's only a matter of time before gold prices return above $2000/oz, and it wouldn't be surprising to see new highs in the first quarter of this year."
Meanwhile, the recent volatile price movements of Bitcoin have also attracted the attention of gold investors, OANDA Senior Market Analyst Edward Moya believes that the new year will bring more uncertainty, and more stimulus measures, inflation risks, and the bursting of the Bitcoin bubble will push gold prices higher.
Moya pointed out that another major driver for gold will come from the bursting of the Bitcoin bubble in 2021, noting that this cryptocurrency has been diverting some of gold's traditional safe-haven inflows since December last year.