Global events over the last few months have demonstrated that gold remains a safe haven in times of uncertainty. From the impact of Brexit, followed by terrorist atrocities in France, right through to the attempted military coup in Turkey, the world is experiencing turmoil. And during times of uncertainty and turmoil, the price of gold rallies to inject its aura as a financial haven.
As the US election carnival draws closer to its finale on November 8, the world watches America’s political antics with bemused interest. Donald Trump has at last succeeded in obtaining the Republican nomination and will now spar with the Democrat’s Hillary Clinton toe-to-toe. At one time, we may have thought that the election of a black president was a giant leap for inclusion – but imagine if either Trump or Hillary were to win! Wait a moment … barring any unforeseen calamity, one of them will actually be the next President of America!
So how will the intriguing events in the USA impact the fortunes of gold investors – tarnish its luster … or continue to shine? Despite some promising periods, 2015 was not a great year for gold. However, the last few months have been good for gold investors as the precious metal has rallied impressively. In the first quarter of 2016, gold went up almost 15%, making it the biggest quarterly gain in a quarter of a century.
Most polls over the last few weeks have placed the former first lady slightly ahead of the billionaire tycoon. What both of them have in common is the level of their unpopularity ratings. The immediate market response has been negligible with today’s price simmering at US$1332 per ounce, marginally up from the last couple of weeks. But what is likely to happen as election day draws nearer and the reality of either a Clinton or a Trump administration starts to sink in? In all likelihood it will foster uncertainty, both within the USA and also across the ocean.
Benjamin Wong, foreign exchange strategist at the Chief Investment Office of Singapore-based bank, DBS Group Holdings Ltd., said in an e-mail: “The market has yet to deal with the political uncertainty going into the Nov. 8 presidential election.”
However, as the political maneuvering gathers momentum a number of respected pundits predict that the support for gold is going to increase.
DBS Group Holdings Ltd., which predicted this year’s rally, says that Gold is in a major bull market and may surge to more than $1,500 an ounce as low interest rates buoy demand and the U.S. presidential election looms. They are now advising investors to buy any declines.
It seems possible that, in the short term, the Trump-Clinton head-butting is likely to have growing impact on the sentiment towards the yellow metal.
Francisco Blanch, head of commodities research at Bank of America Merrill Lynch said in an interview with Bloomberg Television Canada, that long-term interest rates are pretty anchored and will probably end up moving lower over time. This too will have a positive effect on gold.
So as the bell for round one rings for the 58th quadrennial U.S. presidential election, the price of gold remains poised to strengthen as the fight for the world’s top political leader commences and the global audience readies itself for the spectacle of the year.
Written by Michael Pryke on behalf of MetCon
