Gold fell on Tuesday as the dollar and stocks gained ground on the view that Democratic U.S. presidential candidate Hillary Clinton got the better of Republican rival Donald Trump in their first debate, denting the safe-haven appeal of bullion and bonds.
The dollar was last flat against the yen at 100.32 yen JPY= after falling 0.7 percent against the Japanese currency on Monday. The dollar index .DXY, which measures the greenback against a basket of six major currencies, was last up 0.15 percent at 95.443.
Gold prices ended the U.S. day session solidly lower Tuesday, following Monday evening’s U.S. presidential debate between Hillary Clinton and Donald Trump that saw Clinton win the contest, most market watchers reckoned. This helped to put some risk appetite back into the marketplace as world stock markets were mostly higher Tuesday. The key “outside markets” were also bearish for the precious metal markets Tuesday, as the U.S. dollar index was firmer and crude oil prices were lower. December Comex gold was last down $13.40 an ounce at $1,330.70. December Comex silver was last down $0.426 at $19.17 an ounce.
There is a sense, especially outside the U.S., that Trump is an unknown and potentially unpredictable, which could bring anxiety to some markets if it appears Trump has a better chance to become the next U.S. president. Markets are now starting to pay closer attention to the U.S. presidential race heading up to the early-November election.
The general assessment of at least the markets is that Hillary Clinton “won” last night’s debate. That sent the U.S. dollar higher and gold prices lower. It also helped equities rise, although there the story is more nuanced.
This is not to say that Mrs. Clinton said better or smarter things than Mr. Trump, but rather that the markets abhor uncertainty and with Mrs. Clinton they know that, more or less, current policies will continue. The boat will not be rocked. Mr. Trump, whether you agree with his ideas or not, represents an unknown quantity.
With that said, the VIX volatility index fell about 9.5% today.
Mitsubishi sees factors at play that should limit any downside in gold even if the metal should be hurt by a U.S. rate hike or expectations for one. “Negative real interest rates in major markets will continue to provide a supportive backdrop for gold going into the final quarter of 2016, and further policy loosening by the BOJ (Bank of Japan) or European Central Bank will further lower the opportunity costs of holding gold,” Mitsubishi says.
Jeff Currie, head of commodities research at Goldman Sachs, attributes part of the 20 percent rally in gold this year to uncertainty over the coming U.S. election.
“We have a lot of political risk in the market right now, so gold has a strategic purpose,” said Currie, explaining that investors often gravitate toward hard assets in times of uncertainty. “Gold is a hedge against politicians.”
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