The Week Ahead In Gold

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Fortunately for the gold market, the year will soon be coming to a close. For many weary gold bulls, the closing of the books on 2016 cannot come soon enough. Despite the selling seen in the yellow metal over the last several weeks, however, it should be noted that gold is still up on the year.

 

Better days could potentially lie ahead for gold, and the start of the New Year could bring with it some very interesting changes and market action. Although all may seem well today, the global economy has numerous issues that could potentially put a halt to the current rally in risk assets and put a bid back into gold and other perceived safe haven assets.

 

For starters, the current rally in stocks and the dollar is built upon nothing more than hot air. Plans for tax cuts, increased fiscal spending and job creation all sound fine and great, but thus far that’s all it is-talk.

 

Although stocks could see an ongoing boost if such measures were in fact implemented, there are two key considerations:

 

  1. It remains unclear if tax cuts, a massive infrastructure spending program and other potential economic policies will pass muster with Congress.
  2. According to some analysts, the effects of such measures may not provide any long-term sustainable boost to growth.

 

In other words, the markets could be setting themselves up for disappointment. The current rally may march on into the first several weeks or months into Trump’s first term, but investors will soon begin to get a clearer picture on what may or may not be expected from a policy standpoint.

 

Like an overinflated balloon, if investors begin to get the sense that changes in policy are lacking in the “shock and awe” department, much of the hot air from the rally may be released, deflating stock prices along with it.

 

An equity market that begins to show signs of cracking could potentially be very bullish for gold, and the yellow metal could potentially benefit from a significant asset rotation sometime in the New Year.

 

We also feel that China could be a very large wildcard in more ways than one, and that the world’s second largest economy could potentially have a big impact on gold prices in the year to come.

 

It is no secret that China is going to have to deal with its own debt issues at some point, and that the Chinese economy may not be as strong as believed. Worries over China put stock investors on the defensive to start 2016, and some equity markets got off to their worst start to the year on record. Although stocks may head into the New Year with a full head of steam, worries over China can resurface quickly and have the power to put a significant dent into global appetite for risk.

 

As if this was not enough, markets will now also likely pay close attention to Trump’s dealings with China. Trump has made it clear that he intends on taking a hard line with China, and relations between the two counties could potentially see some changes this year. A trade war or other issues could potentially ignite a flight to safety that could possibly benefit gold and other perceived safe haven assets.

 

Gold may see a renewed interest in the coming weeks. For the time being, the market may remain on the defensive, and prices could head even lower than the recent lows. Once much of the current euphoria begins to subside, however, and the dust begins to settle, gold may once again shine as investors look to diversify away from risk assets.

 

At current price levels or even lower, we believe that gold represents an excellent value for the long-term investor and that gold will once again see higher prices in the year ahead while potentially providing a meaningful hedge against many of the potential economic and geopolitical issues that could surface. 

The Week Ahead In Gold

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The highly anticipated FOMC meeting has now come and gone, and as expected, the central bank raised the Fed Funds rate by 25 basis points. The move by the Fed was not a surprise at all, although the central bank did appear to catch markets a bit off-guard with its latest projections.

 

The Fed’s dot-plot now calls for three interest rate hikes next year as opposed to the market’s previous expectations of two hikes. In the grand scheme of things, an extra 25 basis point hike may not seem significant. The additional potential hike does, however, point to a more hawkish Fed.

 

Inflation expectations have been ramping up since the Trump Presidential election victory last month. His calls for increased fiscal spending and tax cuts have been called highly inflationary, although it remains to be seen if many of the discussed proposals will actually become policy.

 

It is also important to remember that not too long ago, it was projected that the Fed would hike rates four times in 2016, yet the central bank was only able to hike once. Rate expectations can and do change quickly, and there are numerous reasons that three hikes may not be seen next year. Either way, the case for a slow and steady pace of rate hikes remains intact, and could be bullish for gold.

 

For the time being, the Trump rally remains in full force, and markets have thus far not shown any real signs of reversing course. Stocks remain near recent all-time highs, and could potentially see even further gains before the rally has run its course. The dollar index also is poised to keep moving higher, and the stronger greenback is almost certainly having a negative effect on gold. Interest rates also continue to rise and bond prices have yet to stem the recent bleeding.

 

Of course, markets do not typically go straight up or straight down, and we would expect to see some type of reversal in these markets-perhaps even a significant reversal-before they possibly continue in their current trends.

 

The perfect storm of stronger risk appetite, higher equities, a higher dollar and rising rates has beaten gold down considerably. There are, however, numerous reasons that gold can still shine bright in 2017.

 

Some of those reasons include the potential for a massive banking crises and significant volatility in the Eurozone, ongoing tensions with Russia and increasing inflationary pressures.

 

Gold may remain on the defensive in the near-term, although the market may be close to a major turning point. Sentiment surrounding the gold market has been approaching a bearish extreme, and once the last gold bull has thrown in the towel, the market could potentially turn and turn hard.

 

If current outside market trends continue, gold could see another wave of selling that could potentially take prices down to the $1080 area. Such a move could very well drive long capitulation, and could potentially mark a medium to long-term low in the price of gold.

 

We believe gold represents an excellent value at or near current levels, and view any further downside in the gold price as an excellent opportunity for the long-term investor.

The Week Ahead In Gold

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The gold market continued its recent losing ways on Friday, as the yellow metal finished decidedly lower to end the trading week. In fact, gold is now on the verge of what could be a significant, fresh leg lower in price that could potentially see the market test sub-$1100 per ounce levels.

 

A test of $1080 cannot be ruled out, and in fact could potentially set the market up for finding a more sustainable bottom.

 

The same issues that were bothering gold investors a month ago are still bothering gold investors today. A combination of strong risk appetite, higher equities, rising interest rates and a stronger dollar index are all taking a toll on the gold market.

 

Stocks carved out fresh all-time highs once again on Friday to finish the trading week with a bang. Although seemingly more and more analysts are now referring to the rally as being “overdone,” “overbought,” or “running out of steam,” there simply is no telling just how high equities might climb. As new highs are reached, there is simply little to no overhead resistance to keep a lid on prices, and stocks are likely to drift higher if nothing else.

 

The rise in interest rates seen since the Trump election victory has been swift and severe, and already appears to be taking a toll on some areas of the economy like mortgage refinancing.

 

The Federal Reserve is set to meet this week and it is widely expected that the central bank will raise interest rates for just the second time in a year. It would seem, however, that much of the heavy lifting has already been done with rates in the last few weeks, and the Fed hike has likely been fully priced into the market at this point.

 

Although seemingly counterintuitive, the Fed actually taking action could potentially help the precious metals find a near-term bottom.

 

While an interest rate hike of 25 basis points seems to be a foregone conclusion at this point, investors will likely now focus their attention on what the central bank may or may not say regarding the pace of hikes in 2017.

 

Donald Trump is considered by some to be more hawkish, and some have suggested he may try to influence the Fed. The Fed will likely try to steer clear of any discussion about the potential effects of Mr. Trump’s policies, and may not offer a ton in the way of guidance for next year. As of right now, the market is pricing in two rate hikes for 2017, which would likely come in June and December.

 

The central bank maintaining its stance of slow and incremental rate hikes could potentially be bullish for gold and precious metals, and overblown fears of accelerated rate hikes could potentially fade based on the central bank’s commentary.

 

It is worth noting that a historic event took place last week that could be a potential game-changer for gold. A new gold standard was agreed upon by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the World Gold Council. Changes made to Sharia law could now potentially open the door to gold investing for 1.6 billion Muslims all over the world.

 

This new source of demand could potentially have a significant impact on this important asset class, as Muslims make up nearly 25 percent of the world’s population. 

 

The Week Ahead In Gold

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Although the gold market ended last week on a positive note, the bulls have their work cut out for them undoing the recent chart damage inflicted on the yellow metal in the aftermath of the surprising Donald Trump election victory in early November.

 

That being said, the precious metals are showing some signs of bottoming, and thus far the bears have not been able to push prices beyond the recent low prints.

 

Friday’s Employment Situation Report was not exactly stellar. The U.S. Department of Labor reported that non-farm payrolls saw 178,000 jobs created in November while the unemployment rate ticked lower to 4.6 percent.

 

October jobs data was revised lower, while September jobs data was revised higher. Of particular note is the downtick in the unemployment rate. While at first glance this figure seems encouraging, it can also be misleading. A decline in the participation rate was reportedly the driver behind the lower rate, not faster job growth.

 

All things being equal, this latest jobs report will likely keep the Fed on track for an interest rate hike at its next meeting later this month.

 

Investors may now turn their attention to the pace of future rate hikes from the central bank.

 

Markets are now pricing in two additional interest rate hikes in 2017, a forecast that could change rapidly if the data stream shows further strength. For the time being, however, the data stream continues to show some mixed signals, and the Fed is likely to stick with a very gradual approach as it looks to normalize monetary policy.

 

Key markets that can have a direct effect on the gold market including stocks, treasuries and the dollar index have all seen strong moves in the last three weeks. Those moves could, however, be coming to an end, at least in the short-term.

 

Some analysts have been suggesting that the equity rally has been overblown, and that a pullback in stocks is becoming more likely. Likewise, some believe that the sharp move lower in treasuries has also been overextended, and that a reversal is likely.

 

Markets have been moving on the notion of stronger economic growth driven by tax cuts and increased government spending. Interest rates have been moving based on the idea that Trump is more of a hawk than a dove, and that his plans are likely to fuel inflation.

 

At this point, all of this could be considered conjecture, and sentiment among investors has the potential to change quickly if some of the key policies recently discussed are not able to be implemented.

 

Investors will also not likely forget that much of the world remains engaged in ultra-low rate policies and quantitative easing. Even if the U.S. economy gains further steam, the global economy may remain sluggish and see weak growth for some time to come.

 

Gold may already be in the process of forming a meaningful bottom, and some analysts have already suggested significantly higher gold prices by the end of the year. Of course, much remains to be seen, but long-term investors are likely to remain focused on the potential benefits of gold ownership and come to the conclusion that many of the reasons for buying gold in recent years still exist today.

 

Those same investors could then potentially view current gold prices as a substantial bargain, and increasing demand could send the yellow metal higher once again. 

The Week Ahead In Gold

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With gold trading below the $1200 level and silver approaching $16 per ounce, this could potentially prove to be a significant buying opportunity for the long-term investor.

 

Could gold and silver go even lower? Sure-anything is possible. It would seem to us, however, that the recent price action in these precious metals has been overdone (which might be said of many key markets since the surprising Trump Presidential victory) and that at some point markets may find more of an equilibrium. That being said, however, we believe that lower prices should be welcomed by investors with open arms.

 

For the time being, optimism over Trump’s plans has fueled stronger equity markets and a stronger dollar while driving down interest rates and demand for perceived safe haven assets such as gold and silver. Whether or not the recent rally is truly sustainable is another question entirely, and some analysts are now calling for a pullback in stocks.

 

It would not be surprising, however, to see this rally in risk assets continue into the New Year. Donald Trump does not take office until Friday, January 20th-nearly two months from now. While talk of his plans and economic agenda has spurred equity buying and a stronger dollar, right now that’s all it is-talk. Once Mr. Trump takes office, time will tell if he is able to implement many of his plans. While Trump has spoken of a broad tax cut and increased fiscal spending, it remains unclear exactly how he plans to accomplish this.

 

The recent events in India may also play a key role in gold’s near-term fortunes. India recently banned both the 500 and 1000 rupee notes in an effort to crackdown on black money, and now there is discussion of a gold import ban in the country. According to some reports, India imports about 700 tons of gold each year-a massive quantity. If there is in fact a ban put on imports, the gold market could potentially see quite a shock, in fact, some are already comparing such a move to Nixon taking the dollar off of the gold standard.

 

Of course, whether or not such a move materializes remains to be seen, but you certainly have to consider the possibility that a potential Indian gold import ban may be one of the forces behind the recent selling in gold.

 

With a possible Santa Clause rally being seen in stocks over the next several weeks, gold and silver may remain on the defensive for the remainder of the year. That being said, however, these metals may be getting close to finding a bottom, and it would not be surprising to see that bottom coinciding with the Fed lifting rates next month. Fed Funds futures are now pricing in a 100 percent chance of a rate hike by the central bank at its next meeting. The next hike could potentially become a case of sell the rumor buy the fact for gold and silver. 

A Brief Honeymoon

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Unfortunately, what is being lost in the debate over the last two weeks over President-Elect Donald Trump is not how, but why. Dialogue has been focused on questions of whether a segment of America is inherently racist or sexist or many other non-complimentary labels. Barring the merits of the previous conversation, as it’s certainly a discussion worth having over an increasing intolerance of immigration during periods of low economic growth, it is also escaping from the reality that is being witnessed across the western world and that is the momentum gain of what would previously have been called fringe parties or candidates. The debate has to be shifted to why, because if anyone thinks Donald Trump is the finale of all this change, they will be just as shocked by the next mainstream media surprise headline.

 

The debate has already begun over the economic realities of Trump’s America. As discussed last week, the market reaction to the President-Elect was extremely positive, with the Dow Jones Industrial Average continuing to take on new highs over the last five days. Whether this has been attributable to actual perceived positive economic benefits of the incoming administration or the reaction to inflationary domestic policies triggering a selloff in the bond market and a rotation for investors into equities is up for debate.

 

Renowned bond investor Bill Gross argued in his latest commentary that all policies from the Trump economic platform are more capital favoring than that for labour. Meaning the tax reform and repatriation discussed will do little for spurring economic growth in an economy that otherwise lacks growing business investment. Furthermore, it will add to a trend that we’ve been watching with US corporations, which is returning cash to shareholders through dividends and share repurchases further exacerbating the divide between Main Street and Wall Street.

 

Additionally, notable Canadian economist David Rosenberg with Gluskin Sheff goes further to look at the idea of personal income tax cuts, and suggest they will be too marginal and insignificant on the majority of the population that actually has the ability to consume more. He too saves his excitement.

 

And for as many headlines the US election has demanded, we still live in a global world. Shifting overseas we’re closely watching the Brexit negotiations. Not for the factor that they are leaving as that has been settled, but the pressure it is mounting on an increasingly divided European Union. We have upcoming elections in France, Italy, and Austria, and everyone is looking to France for the next ‘Brexit’ or ‘Trump’ moment with the growing popularity of National Front Party Leader Marine Le Pen. As many seem to be suggesting we are looking at a lone Europe as they potentially lose an ally as the US become more nationalistic focused. Thus, the threat of a break up in the euro could be as high as it’s ever been.

 

From the aforementioned synopsis of what may be thought of as global superpowers, it’s difficult to find a takeaway for the markets when they seem so overly consumed with short term and transitory factors. Of significance is the fact the US dollar index, the greenback measured against a basket of major currencies climbed steadily this week. Amidst all this economic uncertainty we’ve seen gold break key support at $1,250 US and trend lower. Despite a supported physical market, gold ETF’s are seeing outflows reversing an accumulation trend earlier in the year. In all likelihood, we have to get past the US Fed raising rates, but we seem to be of the view that this Trump Honeymoon will be short-lived.

The Week Ahead In Gold

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The gold market ended last week near key support at the $1200 level, and thus far the gold bulls have not been able to really stop the bleeding. The market may potentially find some chart support just below $1200 in the $1196-$1198 area, although a decisive breach below this level could potentially see a fresh leg lower in price.

 

Looking at gold as a long-term investment (the view we believe should be taken), the market may potentially provide some significant buying opportunities at current levels or if prices decline further.

 

It is important to keep in mind that markets have been moving since the U.S. Presidential election based on the notion of significant changes in economic and possibly even monetary policies. None of these changes has, however, been put into practice yet, and some of them may be very challenging to implement.

 

Although the idea of increased government spending and lower taxes sounds great on the surface, some analysts have suggested that putting such a plan into action may be extremely difficult. Of course, precisely how Mr. Trump plans on accomplishing such objectives also remains quite unclear, as little if any specifics have been divulged at this point.

 

Some might consider recent market action euphoric, and some analysts have already been discussing the possibility of the stock rally and treasury sell off being overblown.

 

Time will tell…

 

The rally in the U.S. Dollar Index is a whole nother story. The greenback has been on a tear higher, moving up as investors consider the potential ramifications of a Trump Presidency including protectionism, significant changes in trade, higher interest rates and more.

 

The dollar recently broke out above the upper end of its recent multi-year trading range, and is currently trading at levels not seen since the early 2000s.

 

It seems for all practical purposes that the dollar will continue to move towards parity with the euro, while also gaining against some other key currencies. The question is: Is the recent run higher in the dollar sustainable?  The dollar may continue to move higher until more clarity is seen on Trump’s economic plans, and if some of these key plans currently being discussed are not able to be implemented, the dollar could potentially see a major reversal.

 

For the time being, however, it is difficult to imagine a major rally in gold or precious metals if the dollar continues its recent ascent.

 

Interest rates are another key theme that investors will be paying close attention to. Trump is considered by some to be far more hawkish, and investors seem to be speculating on a faster pace of rate increases. Fed Funds futures currently point to about a 90 percent chance the central bank will tighten in December, although this hike appears to have been fully discounted by markets at this point.

 

In fact, with the recent bond sell off, rates have risen sharply in the last several sessions, and it would seem that a lot of the heavy lifting has already been done for the Fed.

 

Some analysts still expect the overall pace of additional rate hikes to remain slow and incremental, as the Fed will likely want to avoid smothering the economic embers currently burning.

 

For now, gold and silver may potentially remain on the defensive. That being said, however, markets have a funny way of sucking as many investors into one side of a trade as possible before turning sharply the other way. The more bearish sentiment becomes surrounding gold and silver, the better the likelihood that these metals have found a significant bottom. 

What Next?

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It’s worthwhile to take a measured second look at what has been an absolutely wild week for the markets. Between the lows of Tuesday night in the overnight futures market, and the closing trade on Wednesday, we witnessed the Dow Jones Industrial Average in a range of 1000 points. What started was an initial selloff with Dow futures downs about 800 points to then rally and finish the day within double digit points of its all-time high. With that kind of market volatility, one would expect that catalyst to have been a definitive act from the US Federal Reserve indicating or making a change in interest rate policy, or federal stimulus unveiled by the US Federal government, but instead just an acceptance speech from the President-Elect, Donald Trump with hints to infrastructure spending and the more positive campaign promises that has investors reacting quickly and with their wallets to his pronouncements.

 

This will be the guessing game between now and the inauguration, and no doubt will contribute to more market volatility, but a modicum of rationality might be needed away from all this excitement to question how much change we may actually see, and what implications it has for the markets.

 

The Republican Party will have control of all three levels of government in the US, but how quickly they will act and give President-Elect Trump a mandate is at this point up in the air. Certainly the idea of corporate tax reform, a tax holiday for repatriating overseas earnings, and a dose of infrastructure spending are all positive to economic growth. On the other hand, it’s hard to quickly forget the uncertainty created by the protectionist rhetoric discussed over the course of the campaign, whether it was NAFTA and trade with Mexico, or slapping tariffs on Chinese goods in attempt to deflate the United States trade deficit with China. As Nouriel Roubini highlights in a recent post, tough talk on China carries the populist appeal, but is quickly realized once in office that it’s a zero sum game.

 

Similarly, with NAFTA, it does not seem like Trump would enter into scenario where he may cut off his nose to spite his face. As was a great pain for enlightened watchers throughout the campaign, the way in which the North America Free Trade Agreement was discussed illustrated how little understanding there was of the pact. As we’ve learnt, the threat of Trump pulling out of NAFTA could very much be possible by providing 6-month notification to Congress, but the ramifications of that makes it far less probable. An article in this Thursday’s Wall Street Journal debunks the “made in America,” idea of US automobiles and how the assembly is as much a story of parts travelling back and forth cross-border in the process. This is the essence in his team trying shift the conversation from being against free trade to promoting fairer trade.

 

Finally, we have to question whether it seems rational for the markets to be as overzealous as they are. A lot of the rally last week is certainly attributable to financials and anticipation that interest rates will be moving higher in December, and potentially soon after even more so with the inflationary policies proposed by Trump. Furthermore, it was further buoyed by the idea that the lax regulatory wing of the Republican Party would look to repeal Dodd-Frank and other measures that have tightened the grip on Wall Street. Our take is that if this were a government that were to accomplish anything, it will be in accordance with the slow moving pace of Washington, and very much in accordance with the marginally right of center but a divisive congress, and a filibuster prone senate.

 

As has been our view leading up to the election, the rhetoric created an opportunity for a lot of ‘noise,’ but whoever was to be elected does not change the dynamics of the global economy. As so many try to explain the phenomenon of Trump, former Pimco CEO Mohammed El-Erian explains it most prophetically by stating that low growth economic environments create civil unrest and prompt political change. The surprise outcome of the US shock should not surprise us any more than elections in Greece, Egypt, and Britain, including Brexit, and the list goes on. Trump will be a distraction, and justifiably an upsetting one for a number of people, but the current environment of a struggling debt burdened global economy has not changed, and for certain the alternative to President-elect Trump; albeit more tolerable to some, obviously wasn’t the answer.

The Week Ahead In Gold

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With solid weakness in Friday’s session to finish the week on a sour note, gold could see additional selling pressure before finding more solid footing. The yellow metal declined over $100 per ounce from the highs seen Tuesday night to the lows seen on Friday.

 

Gold did pretty much the exact opposite of what many had expected should Donald Trump somehow pull off an upset victory. That being said, however, financial markets may take some time to really sort things out. Markets could potentially experience an ongoing period of heightened volatility as more clarity is provided regarding Mr. Trump’s plans for the country and the economy.

 

This week, investors will monitor many of the usual key data points. MBA Mortgage Applications, Weekly Jobless Claims, PPI, Housing Starts, Leading Indicators and more are set for release. In addition, there are several Fed officials speaking throughout the week at various engagements.

 

The focus, however, will likely remain on Trump and his plans for the future. The notion of protectionism and significant changes in immigration policy as well as the potential for swelling federal budget deficits could keep investors on their toes, and markets on edge.

 

To say that there is a great deal of uncertainty right now would be an understatement, and markets will be looking for a lot more clarity on key issues than what they have seen thus far.

 

Given the amount of unknowns right now, some have called into question whether the Fed will in fact look to lift rates next month. Although Fed Funds futures still point to a strong likelihood of a December hike from the central bank, the Fed could possibly hold off if market volatility continues, just as it did during the summer of 2015 as Chinese market volatility spread and just as it did following the historic Brexit referendum back in June.

 

The Fed itself is a whole nother story, as Trump has been critical of the central bank and its Chairwoman Janet Yellen.

 

Gold may have further downside to go, but hopefully you have kept some powder dry as lower gold prices could potentially present an excellent long-term buying opportunity. Although gold and other perceived safe haven assets have been hit hard in recent days, the euphoria over the possibility of massive infrastructure spending could fade-especially if investors begin to focus more on how such spending would impact federal deficits and potentially stoke inflation.

 

The bond market appears to be telling us that a December rate hike from the Fed is a near-certainty, as yields have spiked this week. The pace of further hikes, however, remains unclear. On one hand, some analysts believe Trump to be more hawkish, while some argue that his policies could potentially drive the economy into recession.

 

Time will tell as Trump’s plans are unveiled and put into action. For the time being, gold may actually begin to stabilize and rally after the Fed hikes in December. In our opinion, $1200 per ounce gold or even lower prices are likely to attract significant buying interest. With a long-term time horizon in mind, adding to gold holdings around current price levels could potentially prove to be an excellent value.

The Week Ahead In Gold

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Tick tock tick tock tick tock…  The clock is quickly winding down to the U.S. Presidential election, and right now it appears to be a dead heat. Republican candidate and businessman Donald Trump has closed the gap between himself and Democratic candidate Hillary Clinton, with at least one pole recently putting Trump ahead in the race.

 

The bottom line? This thing could go either way right now…

 

Markets have remained relatively calm and subdued ahead of the highly anticipated election, although nerves may become considerably more frayed in the coming days. Investors may potentially seek refuge in perceived safe haven assets early next week, and gold and silver could potentially attract significant buying interest.

 

Some analysts have suggested that the Presidential vote could be akin to the Brexit vote seen back in June. Following the U.K.’s decision to leave the European Union, markets were hit hard, with equities as well as commercial commodities being heavily sold off.

 

The world, however, did not end.

 

Markets proceeded to bounce back, with stocks rebounding strongly and achieving new all-time highs in the process. Commodities recovered as well, and within a few weeks it was almost as if nothing had happened at all.

 

Will this election provide a similar scenario?

 

Possibly, but there are some major differences. A Trump victory could bring with it a significant amount of uncertainty as some analysts have questioned his policies and cited a lack of detail on how he plans to accomplish some of his goals.

 

On the other hand, a Clinton victory brings with it its own set of uncertainties, such as whether or not the email server issues that have been the topic of so much discussion are finally put to bed.

 

What if Clinton wins, but the election results are disputed? Then what?

 

Although many articles in financial media have discussed the idea of sharply higher gold if Trump does in fact pull off a victory, we believe that a strong case can be made for gold to go sharply higher regardless of who wins the race.

 

It seems like a long time ago now that investors were strictly focused on the Fed and the potential timing of the next interest rate hike. Friday’s U.S.  jobs data was considered to be another indication that the Fed will hike in December.

 

Now that the timing of the next rate hike appears to be a foregone conclusion, investors will begin to turn their attention elsewhere. Stocks have appeared much shakier in recent action, and some analysts have been calling a top in equities. Weaker crude oil seen in recent days could potentially exacerbate any stock weakness.

 

The dollar index may also remain at the forefront of investor attention. A stronger greenback has likely been a significant factor in gold’s lack of sustainable upside in recent weeks, although the dollar has been showing some signs of fatigue.

 

Gold will once again try to maintain trade above the $1300 per ounce level with a close above that on Friday. Investor anxiety over the election and its results as well as potentially weaker stocks and a weaker dollar could provide the gold bulls with enough ammunition to take prices to higher, yet sustainable levels.