Gold rebounded on Monday from 5-1/2 month lows as the dollar shed some of the hefty gains made the previous week on bets that U.S. President-elect Donald Trump's plans for fiscal stimulus would prove inflation.
Gold prices ended the U.S. day session slightly higher Monday, on mild short covering in the futures market and a bit of bargain hunting in the cash market, following recent selling pressure that saw prices hit a nine-month low last Friday. However, the safe-haven metal was down from the day’s best levels as the U.S. stock market rallied, to suggest keener risk appetite remains in the marketplace. December Comex gold was last up $2.00 an ounce at $1,210.80. December Comex silver was last down $0.089 at $16.535 an ounce.
"ETF investors... are continuing to withdraw capital on a massive scale," Commerzbank said in a note. "On Friday, there were renewed outflows of eight tons, and of nearly 71 tons in the last seven days of trading. That is the most pronounced outflow since July 2013."
Gold has fallen since Donald Trump won the U.S. presidential election, but look for the metal to eventually turn higher again, says Adrian Day, chairman and chief executive officer of Adrian Day Asset Management. He points out that many of the market moves since Trump’s win – stock-market gains and weaker gold – defied pre-election expectations. He explains that higher Treasury yields overrode “the negative sentiment globally towards Trump.” Further, stocks got a boost from ideas that certain sectors would fare better under Trump, such as banks (less regulation), base metals (infrastructure spending), oil drilling and drug companies. Still, Day says, many of the market moves were likely “overdone.” Going forward, a Trump presidency is likely to mean increased spending, including infrastructure and defense, but tax cuts and less regulation, Day says. He also looks for higher interest rates, but not too high. “With regard to [Fed Chair Janet) Yellen’s threat for a more ‘hawkish’ Fed to counter-balance fiscal profligacy, we would retort, ‘I knew [former Fed Chair] Paul Volker, and she’s no Paul Volker,’” Day says. “We do not expect sharply higher rates, and further out we will likely see higher U.S. debt (already high) and higher inflation (already stirring). So the outlook a little further out—combined with easy money around the world, stronger Indian demand, possible geopolitical turmoil, and a decline in mine production—will be a higher gold price.”
Reference: Kitco, Reuters
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