Gold prices are trading near steady in active evening trading Tuesday as all eyes of the world marketplace are on U.S. presidential election results. As some states are seeing their voting booths close, Donald Trump has the very early lead in electoral votes. However, it's way too early to draw any conclusions on who will win the election. Still, gold trading is active and somewhat volatile, with prices holding just above unchanged.
Gold steadied in Asian trade on Wednesday as early state exit polls in the U.S. presidential election showed wins for both Republican Donald Trump and Democrat Hillary Clinton.
While the U.S. presidential election is the immediate focus of markets, ultimately continuing low interest rates should remain supportive for gold, says TD Securities. Gold ran higher last week after news that the FBI was again looking into U.S. presidential candidate Hillary Clinton’s e-mail issues, then fell back at the start of this week when the FBI said there would be no reversal of its previous conclusion that no charges would be filed. “Through the U.S. election volatility, we expect that market participants will refocus on the likelihood of a December hike (very high at this point) but more importantly the evolution of interest rates next year,” TDS says. “For now, we still expect that despite a December hike, the Fed will be increasingly conservative next year and leave rates at very accommodative levels. This environment of low rates, with increasing headline inflation rates (mainly pushed by energy base effects) will serve to keep real rates boosting the appeal of gold, especially with stock markets looking shaky and potentially setting up for a break lower should the Fed follow through with its rate hikes.”
"If Clinton does win, this is not going to be a major surprise so the magnitude of adjustment that we would see coming through in gold may not be that large," said Vishnu Varathan, senior economist at Mizuho Bank. Varathan said the reaction in the gold market to the outcome of the U.S. vote may be more limited compared to its surge when Britain voted to leave the European Union in June. "In this case whether it's a Clinton win or a Trump win, at this point beyond just unravelling some of the very tail-risk events, there's really nothing left in the tank to aggressively trade gold," he said.
Reference: Kitco, Reuters
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