Gold prices started back below the major resistance level of $1,300 per ounce this morning before recovering, as traders sold into this week’s rally to lock in profits. Markets across the spectrum have been upended this week by Donald Trump’s higher poll numbers in the presidential election. Seen as a “loose cannon” by Wall St, the unpredictability of a potential Trump Administration has investors going into a defensive posture. This is weighing heavily on stocks, while increasing demand for safe havens such as gold and the Swiss franc.
Spot gold recovered from early losses this morning, to begin another run to break back above the $1,300 mark. Spot silver prices are seeing a correction this morning, down 1.2% to $18.24/oz after gaining 5.3% this week through Wednesday.
Prices are being helped by early struggles of the US dollar. A surprise ruling the UK’s High Court has given the ultimate decision on Brexit to the British Parliament. Any agreement reached by Prime Minister Theresa May’s government must be ratified in Parliament before it can take effect. The ruling helped the pound gain over 1% against the dollar in New York.
Good economic news this morning gave only momentary support to a volatile stock market that continues to be pummeled over the rising odds of a Trump presidency. Those odds have gained another 3% overnight, according to Nate Silver’s FiveThirtyEight political analysis site. Silver and his team of statistical wonks are known for analyzing and forecasting the races (including the House and Senate in addition to the presidential ticket) based on polling. The most recent numbers show Trump with a 33.2% chance of winning, and giving Hillary Clinton a 66.7% chance of prevailing.
Trump has made inroads in several states that were traditionally Republican but were leaning towards Hillary, moving them to toss-up status, or even back to leaning Republican. The contest between Clinton and Trump has tightened considerably since the FBI announced it was still looking into more emails related to the former secretary of state’s use of a private server while at the State Department.
Besides the aversion to Trump as commander-in-chief on Wall St, the lack of clarity about who will ultimately win is also weighing on stocks. Investors are simply less willing to turn to riskier assets with the election in doubt. Moreover, with a closer race, the increasing odds of a recount or disputed election result is also factoring into the sell-off in equities. The S&P 500 is threatening to fall for the eighth straight trading session, and the Dow Industrials slipped below 18,000 for the first time since July. At the same time, the dollar has eased back from its recent highs. The DXY index traded at 97.3 on Thursday morning.
All of this bodes well for safe haven assets like gold and silver. In the time since the continuation of the FBI probe into Clinton’s emails was announced, they have been the two best-performing assets available, with silver leading the way. Today’s pullback in the precious metals is largely due to traders taking profits by selling into the rally. Don’t anticipate a significant decline for gold or silver between now and the election.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product