How to trade gold next week? JPMorgan Chase: No matter who wins, if gold prices pull back, it’s a buying opportunity

"It is difficult to hold a pessimistic view on gold." This is the judgment given in JPMorgan Chase's latest research report ahead of the U.S. elections. The bank stated in the report:

Regardless of who wins, if gold prices pull back, it will be a good buying opportunity.

Currently, gold trading is very active, and if the election results are unexpected in the short term, the market may experience volatility. However, JPMorgan Chase believes that in the long run, gold will still benefit from the Federal Reserve's rate-cutting cycle, purchases by central banks, and the global trend of currency depreciation. The bank wrote in the report:

These factors have supported gold prices over the past year, and regardless of the outcome of the U.S. elections, these driving forces will continue to exist.

The report predicts that if the Republican Party wins comprehensively, gold prices are expected to rise by 7-10% in the next 1-2 quarters; even in the most conservative scenario—if Harris wins and Congress is divided—there may be a short-term pullback of 2-3%, but there will still be room for an increase afterward.

JPMorgan Chase: Short-term volatility may occur, but long-term outlook remains positive

Since July of this year, gold prices have risen by about 15%. In August and September, driven by the decline in U.S. Treasury yields and expectations of the Federal Reserve's rate-cutting cycle, gold prices continued to rise.

Recently, as market expectations for a Trump victory and a comprehensive Republican win have heated up, investors have turned to precious metals to hedge against U.S. fiscal issues, inflation concerns, and geopolitical tensions. Therefore, despite the strengthening dollar and rising yields, gold prices have still reached new highs this month.

Currently, gold is highly sought after by investors. During last week's IMF/World Bank autumn meeting, gold was voted as the second-best performing asset by year-end, second only to the S&P 500 index. Market data also confirms this: net long positions in COMEX gold futures have hovered around 80-90%, close to the peak levels of 2020, and have continuously set historical highs in nominal value.

As the U.S. elections approach, there is no doubt that gold prices may experience short-term volatility, but JPMorgan Chase believes that the driving factors for gold prices in the long term still exist, maintaining a positive long-term outlook:

Gold continues to be the main beneficiary of the Federal Reserve's rate-cutting cycle, central bank gold purchases, and the global trend of currency depreciation. These driving factors have supported gold prices at different times over the past year, and regardless of the outcome of the U.S. elections, these driving forces may continue to exist.

Led by Natasha Kaneva, the bank's global commodities analysis team wrote in the report:

Regardless of the outcome of the U.S. elections, the supporting factors still exist, and we view any pullback that occurs after the elections as a buying opportunity.

Predictions for Gold Performance Under Different Election Outcomes

JPMorgan Chase has analyzed the potential performance of gold under different election outcomes in detail.

First, if the Republican Party wins comprehensively, the bank believes this will "accelerate" the rise of gold, with a potential short-term increase of 2-3% and an expected rise of 7-10% in the next 1-2 quarters. The reason is that investors will further turn to gold to hedge against inflation risks brought about by tariff policies and concerns over "currency depreciation" caused by the widening fiscal deficit If Trump wins but Congress is divided, gold prices are expected to rise moderately by 1-2% in the short term, with an increase of 3-5% over 1-2 quarters. Although fiscal concerns have eased somewhat, the inflationary effects of tariff policies cannot be ignored.

Furthermore, the analysis states that even if Harris wins and Congress is divided, there may be a short-term decline of 2-3% due to profit-taking, but there is still a slight upward potential of 0-1% over 1-2 quarters. Key support comes from global central banks and physical demand in Asia:

Although central bank purchases have slowed, according to the World Gold Council, official purchases in the third quarter of 2024 were still about 186 tons, and despite prices continuing to soar, the quarter-on-quarter decline was only 8%.

Overall, JPMorgan Chase believes that although the current market consensus may bring short-term pullback risks, the fundamentals for gold remain strong in the medium term. Regardless of the outcome of the U.S. election, the three supporting factors—Federal Reserve rate cut cycle, global central bank gold purchasing demand, and overall currency depreciation trades—will continue to exist.