Over the last week, the polls between Hillary Clinton and Donald Trump have narrowed. What does it mean for the gold market?
Last Friday was full of important events. The surprisingly positive GDP report was released, which initially pushed the price of gold down, but the yellow metal quickly reversed course and turned higher. The reason could be that markets dig into the details which showed that a better-than-expected GDP growth rate in the third quarter of 2016 was boosted by a one-time surge in soybean exports. Anyway, the news about the GDP was very soon overshadowed later on Friday by the news that the FBI was re-opening its investigation into Hillary Clinton’s emails.
The renewal of the FBI probe has seriously damaged Clinton’s election chances. One week ago, she led the race by about five percentage points. Now, her advantage over Trump declined to 1.3 percentage points, according to RealClearPolitics which averages the results of most major polls. Surely, Clinton is still more likely to win, but momentum is now in Trump’s favor. Remember the surprising Brexit vote? Anything can happen, especially that his chances in a few key states increased (national polls do not matter).
The improved odds of Trump’s victory knocked the U.S. dollar lower and boosted the safe-haven demand for the yellow metal. Investors do not want to be surprised as they were in case of the British referendum and they try to prepare for the surprising result, already purchasing the shiny metal. Hence, the renewed uncertainty over the outcome of the presidential election is positive for the gold market. The support from the anxiety that Trump may win (which would be a black swan in a sense) is likely to continue at least until the election. Clinton’s victory would imply a status quo, while nobody knows what to expect of Trump. And in the case of his win, the Fed could postpone the hike until next year, which may be one of the reasons why the uncertainty over the elections supports the price of gold.
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Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.
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Arkadiusz Sieron
Sunshine Profits‘ Gold News Monitor and Market Overview Editor
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