The price of gold turned slightly negative from the sharp gains made earlier on Wednesday, after a conciliatory victory speech from U.S. President-elect Donald Trump also helped the dollar rebound.
Gold had surged by nearly 5 percent to a six-week high of $1,337.40 an ounce as it emerged that the Republican nominee had triumphed over Democrat Hillary Clinton in the presidential election, a surprise for markets which prompted investors to seek refuge in perceived safe-haven assets like gold.
"It's too early to predict if Trump will enhance or hurt U.S. growth longer term; however, his policies should pressure U.S. real rates lower, while greater policy uncertainty is gold supportive," said UBS Wealth Management Research in a note, forecasting gold prices at $1,350 in six and twelve months.
A win by U.S. president-elect Donald Trump is “bullish for gold but not explosively so,” says the GFMS team at Thomson Reuters. Gold fell back from overnight highs, running into selling on early strength, but the yellow metal should become a “buy-on-dips market,” GFMS says. The metal soared overnight as Trump won, but ran into chart resistance at a downtrend line that dates back to the record highs of 2011, GFMS says. Analysts cite some profit-taking on the run-up. “Now we need to look to the future and the swirling uncertainties around the economic and political outlook,” GFMS says. “Certainly president-elect Trump appeared to adopt a more conciliatory tone in his initial remarks than in the oh-so-combative presidential election campaign, but the markets will need more guidance before they can settle. In the short term, therefore, further volatility and risk-off activity could easily prompt further gains in the gold price, while for the longer term the picture is more hazy, but points overall to further bullish action. This, though, is more likely to be on the basis of bargain hunting into dips rather than a headlong pursuit of higher prices.” Support could come from widening budget deficits and inflationary implications, GFMS says.
“Financial markets have fallen sharply in response to Donald Trump’s election as the 45th President of the United States. Equity markets are down notably in Asian and early European trading. Gold has, by contrast, increased, outperforming other assets, including other safe havens. It is currently trading at over US$1,300/oz, compared with US$1,275/oz before the vote counting began.
“Short term volatility in the wake of this election is inevitable, as it signals a major political and economic change. Gold trading volumes have risen sharply in Asia. Western markets, which have just opened, will likely see a continuation of that trend”.
“We are seeing increasingly fractious politics across the advanced economies, and this trend, combined with uncertainty over the aftermath of years of unconventional monetary policies measures, will firmly underpin investment demand for gold in the coming years”.
Reference: Kitco, Reuters
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