Visitors Now:
Total Visits:
Total Stories:
Profile image
By BullionVault.com (Reporter)
Contributor profile | More stories
Story Views

Now:
Last Hour:
Last 24 Hours:
Total:

'Trumpflation' Bets See Dollar Up, Gold Hit 5-Month Low as Bonds Drop, Copper Gains on Fed Rate-Hike Outlook

Monday, November 14, 2016 7:45
% of readers think this story is Fact. Add your two cents.

(Before It's News)

Adrian Ash is head of research at BullionVault, the world-leading gold trading & ownership service online…

GOLD PRICES declined to a 5-month low on Monday morning in London as the US Dollar rose on the FX market amid growing expectations that the US stockmarket's strong gains following Donald Trump's election victory will see the Federal Reserve raise its key interest rate in December, writes Steffen Grosshauser at BullionVault.
 
Gold dropped 1% from last week's post-election slump to touch $1212 per ounce, its lowest level since 2 June, three weeks before the UK's shock Brexit referendum result saw the metal surge above $1300 per ounce.
 
Gold prices today popped $15 per ounce higher from that new 5-month low, while European stocks also rose, pushing the pan-European Stoxx 600 up over 1%, but government bond prices fell again.
 
That meant yields on 10-year US Treasuries jumped to their highest since January at 2.25%. 
 
 Chart of 10-year US Treasury bond yields. Source: Bloomberg.com
 
The US Dollar meantime hit its strongest level against the Euro currency since start-June, rallying after Wednesday's initial sell-off as traders, analysts and pundits said they expect greater fiscal spending and higher inflation to follow president-elect Donald Trump's inauguration next January. 
 
“People seem to have unwound their Trump-risk and are now talking more about 'Trumpflation',” says Jeffrey Halley, senior market analyst at Canadian-based currency data provider Oanda.
 
“Trump's fiscal policies…with all this infrastructure…would push up inflation and that would push up borrowing rates and yields in the States.”
 
Fed vice-chairman Stanley Fischer said Friday that the US economic growth outlook appears stable enough to raise interest rates again after delaying since last December's first rise after 7 years at zero, increasing the opportunity cost of non-interest-bearing gold.
 
Gold prices have now fallen by more than $100 since the initial spike on news of Trump's election victory.
 
“We are still negative on gold short-term in light of a stronger Dollar, rising rates and rising equities,” says US brokerage INTL FCStone's analyst Edward Meir.  
 
“Donald Trump's proposed policies,” says Swiss bank Credit Suisse, “are causing turmoil in emerging markets and higher inflation could prompt the Federal Reserve to accelerate the pace of rate hikes.”
 
“The rate hike in December is an absolute done deal now,” Oanda's Halley adds. 
 
“With gold closing below the important $1242 support level, a short- and mid-term downside trend pressure is likely into the year-end,” according to German financial services group Commerzbank.
 
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust (NYSEArca:GLD), shrank almost 0.8% to 934.56 tonnes as shareholders liquidated stock on Friday.
 
Silver today caught up with last week's drop in gold prices, falling to the lowest level since the beginning of June by briefly touching $17.06 per ounce.
 
In contrast, base metals led by copper – now 11% higher from Wednesday's result – reached year-to-date highs as money managers bet that Trump's promise to spend significantly on public infrastructure will boost construction.
 
“Once we are through this period of over-reaction,” says a note this morning from bullion market-makers ICBC Standard Bank, “we think the rationale for investors to build and hold positions in gold will likely be stronger in 2017, not weaker.
 
“The US economy may well be facing a slowing real estate market…Sluggish global trade will be facing more protectionism…And jittery moves in longer term inflation expectations will unsettle investors.”

 

Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the mining-sector’s World Gold Council research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2010

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Report abuse

Comments

Your Comments
Question   Razz  Sad   Evil  Exclaim  Smile  Redface  Biggrin  Surprised  Eek   Confused   Cool  LOL   Mad   Twisted  Rolleyes   Wink  Idea  Arrow  Neutral  Cry   Mr. Green

Top Stories
Recent Stories

Register

Newsletter

Email this story
Email this story

If you really want to ban this commenter, please write down the reason:

If you really want to disable all recommended stories, click on OK button. After that, you will be redirect to your options page.