In Depth

Gold price waits for rates clues from Jackson Hole

Political turmoil in the US has the potential to 'help gold in the short and longer term'

Gold price gives up gains as 'Trump hump' fades

9 November

Gold glittered in early trading as Donald Trump's shock win in the US presidential election prompted investors to flee to safe havens this morning.

But after the Republican gave a victory speech described as unexpectedly "presidential", anxiety is already easing and the metal has given up most of its earlier gains.

Gold prices surged yesterday, as markets gambled heavily on a Hillary Clinton victory, from below $1,280 an ounce to more than $1,337 an ounce at one point – its highest since late September.

After a little more than an hour of trading in London, however, trading had fallen back to around $1,297, although still up 1.7 per cent on pre-election settlement, indicating a degree of safe haven demand amid "rampant volatility", as The Guardian calls it.

Equity markets slumped this morning, with the Japanese Nikkei shedding five per cent and the FTSE 100 following with losses of two per cent - £37bn - at the open.

European markets have since recovered, with London closing in on parity and the German Dax down 0.9 per cent. The dollar, against which gold is held as a hedge, is also rallying strongly from its earlier collapse.

Predictions had said that a hit to risk sentiment and fears over free-trade deals would drive gold higher in the coming months, with the price hitting $1,400 or even $1,500.

However, in a victory speech that spoke of unity, says the Financial Times, the US president-elect sounded an upbeat tone on the economy, soothing some of the worst fears of markets.

This triggered the end of a "Trump hump" for the likes of the pound and gold, The Guardian's Jill Treanor says.

It remains to be seen if his divisive rhetoric is truly a thing of the past, but a promised economic investment programme could continue to boost the dollar and undermine any future gold rally.

Trump has also spoken out against the Federal Reserve's policy of holding interest rates near-zero, which could indicate a monetary policy shift that would also be bad for non-yielding gold.

However, Vishnu Varathan, a senior economist at Mizuho Bank, told Reuters that in the short term, the Fed will probably defer its expected December rates rise. That might provide some support from gold into the year-end.

Why the gold price could fall to $1,250 - or rise to $1,500

8 November

"The idea of a Donald Trump presidency might make the stock market nervous, but not gold bugs," says CNN Money.

Last week, when the polls were in the process of swinging away from Democratic candidate Hillary Clinton to her Republican rival Donald Trump, gold surged to a month-high of more than $1,300 an ounce.

The metal has "long been the safe asset to turn to during times of financial stress" – and analysts and investors generally see an anti-free trade Trump presidency as just that.

Political betting platform PredictIt "found a very strong correlation of 0.81 between Trump's odds of winning and gold prices over the past 60 days", adds CNN, where "a correlation closer to 1 indicates a tighter relationship".

That also explains why gold has slumped this week, falling 1.8 per cent to $1,284 an ounce on Monday, its largest single-day drop in more than a month, says Bloomberg.

However, Clinton's odds of winning the White House race have been boosted after the FBI closed its second investigation into her use of private email servers with no charge.

Gold's fall has coincided with a rebound on equity markets, with the S&P 500 yesterday rebounding more than two per cent and regaining three-quarters of the ground it lost over a week and a half.

Where gold goes from here depends on the outcome of the vote later today. If Clinton wins, it could continue to wane, while a Trump shock would spark a huge safe-haven rally.

Robin Bhar, the head of metals research at Societe Generale, told CNN gold prices could enjoy a "knee-jerk rally" to $1,400 an ounce if the Republican wins and could end the year between $1,450 and $1,500 an ounce.

On the other hand, according to more than 20 analysts and traders surveyed by Bloomberg, the gold price could fall to $1,250 within a week if Clinton prevails.

Gold price stays high as US election jitters trump Fed hawks

3 November

"With US elections less than a week away… investors chose to focus on politics, rather than economics", says the Wall Street Journal.

Economic news yesterday came in the form of a policy update from the Federal Reserve, which voted - as expected - to hold interest rates but gave stronger hints that it could tighten monetary policy in December.

Rates increases are generally bad news for gold, "which struggles to compete with yield-bearing investments when borrowing costs rise", says the WSJ.

Instead of falling, however, prices rose 1.6 per cent for the day to settle at $1,308 an ounce, the first time gold has finished a trading session above $1,300 since 3 October.

Brien Lundin, the editor of Gold Newsletter, told MarketWatch traders had expected the rates hold and suggestions of an increase next month. Instead the market's jitters ahead of the presidential election next Tuesday are holding sway.

One poll yesterday put Republican Donald Trump marginally in the lead in the race for the White House, while the lead enjoyed by his rival Hillary Clinton has halved since an email scandal came back to the fore last week.

Markets fear a victory for Trump, whose protectionist rhetoric has prompted concern for the economy under his presidency. 

"Politics are going to keep the market uneasy enough that there will not be aggressive selling in gold… just in case there is a surprise Tuesday night," said Peter Hug, the global trading director at Kitco Metals. 

Consolidation selling this morning pushed gold down around one per cent, although it is still above its one-month high of $1,292 an ounce on Tuesday.

If Clinton emerges victorious next week, focus will shift back to the rates outlook and gold will most likely resume its downward trend. 

The Fed's policy statement yesterday included stronger hints of a rise in December, with officials pointing to rising inflation expectations and warning they need only "some further evidence" of economic progress to act.

If Trump wins, however, then all bets are off. Yesterday, HSBC became the second analyst to predict gold could surge to $1,500 on safe-haven buying in that eventuality, says Mining.com.

Gold price heads for $1,300 as Trump poll lead sparks 'panic'

2 November

The gold price is threatening to break back through the $1,300 an ounce mark for the first time in a month, after a shock poll put Donald Trump in the lead in the race for the White House.

FXTM Chief Market Strategist Hussein Sayed told The Independent global markets are in the "early stage of panic", following the news that the Republican has taken a one-point lead in a poll for ABC News and the Washington Post.

That lead is well inside the margin of error, but it still prompted a sell-off that sent shares in Asia to a seven-week low and left all major international equity benchmarks in the red.

Wider polling averages have also shown Democratic candidate Hillary Clinton's lead roughly halving since Friday, when the FBI announced it is re-opening an investigation into her use of private email servers.

Traders are worried about the implications if Trump wins the election, given his protectionist, anti-free trade stance. That's boosting demand for safe haven assets like gold – and the metal is being further bolstered by a related fall in the dollar.

The gold price was up 0.7 per cent to $1,295 an ounce this morning, the highest it has been since 4 October. It could go on to break through $1,300 for the first time since 3 October.

Sentiment had turned negative on the precious metal since it hit a two-year high of $1,380 in July. But there have been forecasts that one of the most divisive US presidential elections in history could spur a recovery. 

Two weeks ago Barnabas Gan, an analyst at Singapore's OCBC bank, said the gold price would ride the "suspense" to $1,300.

Thomson Reuters analysts have said that if Trump does go on to win the election, gold could surge to $1,400 or even $1,500 an ounce, says Mining.com.

The fly in the ointment today is the latest Federal Reserve meeting, which is unlikely to signal another rates rise but could lay the groundwork for an increase in December, says DailyFX.

Gold tends to struggle when rates are rising, as this boosts rival assets that offer an income yield. If a Trump win does hit markets, however, it is less likely that rates would be increased again, so this would become less of a factor.

Gold price: Big investors pull bullish bets at record pace

25 October

Hedge funds and other large investors are "abandoning" the gold market "at a record pace", says Mining.com.

In a move that reflects rapidly deteriorating optimism that gold will regain the lofty two-year high it reached in the summer, "speculators dumped more than ten million ounces of long gold" last week.

That's "the most rapid reduction since 2006, when government first started to collect the data".

In July gold broke through $1,380 an ounce, but it has since lost more than $100 to its current range a little below $1,270 an ounce.

"Year to date the metal is still managing gains of nearly 20 per cent, or more than $200 an ounce, one of its best annual performances since 1980," Mining.com notes.

But it is coming under increasing pressure as speculation grows that the Federal Reserve will increase US interest rates before the end of the year. Market bets now put the odds of a December hike at around 74 per cent, says the Wall Street Journal.

When rates increase, non-yielding gold tends to lose ground to other, income-bearing assets.

While sentiment towards gold is waning, the current net position of large investors is still modestly positive at 13.7 million contracts.

Analysts point out that physical demand from the likes of China and India is strong, which is supporting the market at its current level for now.

HSBC said in the report that Hong Kong's net gold exports to mainland China totalled 555,300kg for the first eight months of 2016, an increase of 15 per cent compared with the same period last year.

That helped to push the gold price modestly higher this morning after a fall yesterday, with the metal up 0.5 per cent at $1,268 an ounce.

HSBC also said that gold will not move significantly until "geopolitical uncertainty" clears. Broadly, a victory for Hillary Clinton in the US election will boost markets and could hit the price of safe haven assets like gold.

"Gold prices seem likely to trade sideways for now," the bank's report said.

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