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Gold was enjoying another solid day of trading on Thursday jumping to a day high of $1,245 an ounce and bringing its gains for the year to 17%.
Following three down years, many factors have been driving gold’s resurgence in 2016:
“Who knows what could happen should he be handed the keys to the White House”
- Geopolitical turmoil – spreading from the Middle-East into Europe and beyond – burnishing gold’s safe haven status
- Doubts about the health of the global economy and financial system and the longer-term impact of the slump in oil prices forcing investors to look for insurance policies
- Uncertainty surrounding the future of the European Union and the possible fallout from a Brexit
- Slumping stock markets around the world pushing investors into alternative assets particularly gold
- Physical gold investors jumping back into ETFs – more than wiping out all of last year’s outflows less than two months into the new year
- Skepticism about further rate hikes in the US and negative interest rate policies in a growing number of developed economies around the world lowering the opportunity costs of holding gold
- Continued central bank buying and a belief that the strengthening trend in the US dollar is over for now
- First indications that inflation may be creeping back into the financial system making gold attractive as a hedge
- A realization that gold around $1,000 an ounce represents an historical bargain buying opportunity
Now, another reason for gold’s new shine can be added to the mix.
Donald Trump.
The Wall Street Journal – no less – is giving voice to the notion worries about Trump’s ascendancy in the US presidential race is pushing investors into the relative safe harbour of the gold market.
The paper quotes David Govett of London-based commodities broker Marex Spectron who “is one trader who thinks that Mr. Trump’s candidacy makes the precious metal a smart place to hide out for the next few months”:
“The mere thought would suggest a good opportunity to buy gold,” said Mr. Govett, who heads the firm’s precious-metals trading desk.
“Who knows what could happen should he be handed the keys to the White House,” said Mr. Govett.”
The Journal also give James Sutton, a London-based portfolio manager on the global natural resources equities team at J.P. Morgan Asset Management, which has $1.7 trillion in assets under management a hearing:
“If there’s any uncertainty regarding the U.S. election and the potential for a slightly off-center candidate, whether that be Sanders or Trump winning the election, then I can see a scenario where that’s bad for the dollar.”