On Sunday, there was the second presidential debate between Hillary Clinton and Donald Trump. What could this event bring for the gold market?
The second presidential debate is behind us. As the first one, it was tense with harsh exchanges, insults and accusations. Both candidates called each other liars and unfit for the office. For us, Trump performed better than in the previous debate and better than expected. He downplayed the tape with his vulgar sexual remarks (“it’s just words folks, it’s just words”) and shifted the topic to Clinton’s deleted emails, the Clinton Foundation and Benghazi. Interestingly, the ‘tape scandal’ has dwarfed the release of Clinton’s Wall Street speeches by WikiLeaks and her seemingly contradictory political views.
Who won the debate? According to most of the polls, Hillary Clinton won. For example, YouGov’s poll found 47 percent of people polled favored Clinton while 42 percent backed Trump. And the markets agree. The Mexican peso rose against the U.S. dollar on Sunday night. Many analysts believe that the peso became the indicator of Trump’s chances of winning the presidency. The gain in the Mexican peso suggests that investors think that his odds deteriorated, as Trump’s policy is considered to be harmful to the Mexican economy.
The bottom line is that Clinton leads Trump by an average of 5.8 percentage points, according to RealClearPolitics. And both polls and market indicators suggest that she won the debate, despite the fact that Trump performed better than last time. This suggests that her odds may rise even further. It is bad news for the gold market as Clinton is considered to be a ‘status quo’ option, which decreases bids for safe haven assets, such as the yellow metal. However, the move should be limited, as Trump’s downward spiral has likely run its course for now. Indeed, confidence in him is at an all-time low. Although historical data suggests that the impact of elections on market returns is often exaggerated, Trump’s victory would be a surprise raising market uncertainty and boosting safe-haven bids for 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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