Price Of Gold Optimism As It Returns To $1,300

Wednesday, November 2, 2016

price of gold

It was just last week that our forecasts of the price of gold looked murky at best. However, in a strange election year and amid all manner of economic reports, the price of gold has unexpectedly returned to the $1,300 mark. While last week, hedge funds showed pessimism over the price of the yellow metal, it appears this week it might be a good idea for investors to take what hedge fund managers say with a grain of salt.

What are the reasons for the new optimism in gold? Let’s look at the macro-level events that have shaped this week’s financial news.

The Election: Does It Really Affect Gold Prices?

Those who watch the stock market noted a steep decline in the Dow Jones Industrial Average last week after FBI Director James Comey announced to Congress that new information relevant to the Hillary Clinton email investigation had been found. This re-opening of the investigation clearly has the potential to swing the state of the election—and as we saw on Friday, the state of the DJIA as well.

This leaves us with an important question: does the election affect both the stock market and gold prices, which have been up since that announcement, or are were merely looking at a happy coincidence for gold investors?

How Does An Election Affect Gold?

Although the truth is likely somewhere in the middle, investors in gold will want to note that perhaps the most important economic date of the year is coming up next week: the US elections.

If recent bad news for Hillary Clinton disproportionately affected the stock market and potentially even had an impact on the price of gold, the results of the election will be pertinent for anyone who likes to watch the price of gold.

According to Mining.com, the “tight race” in the polls has helped spark gold’s jump to a four-week high, although they also cited a weak U.S. dollar—which regular readers here will note is typically a much stronger indicator for the price of gold than most mainstream news.

Even so, “uncertainty about the outcome of the U.S. election” is counted as one of the reasons for gold’s recent jump, according to Mining.com, with some believing that uncertainty in the markets over Donald Trump’s election could be good for gold. Citing GFMS, the article notes that a Trump election could even spark a rally to $1,400 and even $1,500 for the yellow metal.

Watching The Economy

The state of the US economy is always important for the price of gold. In a recent podcast, Peter Schiff revealed his skepticism over the recent GDP numbers, which had the U.S. economy growing at a 2.9% rate, which is faster than many expected. A strong economy with the potential for a December rate hike from the Federal Reserve usually spell low prices in gold, yet we see gold trending upward. It simply seems that many investors are watching the US dollar and the election as signs for gold as an investment, and perhaps not as strongly looking to the GDP numbers.

Darren Capriotti

Darren Capriotti has been a market analyst for the past decade and is an expert in precious metals. He prides himself on his ability to analyze the market and offer true value to investors with questions about gold, silver, and other precious metals. Highly educated, incredibly passionate, and more accurate than most, Darren offers a true, unbiased look into what investors can expect in the precious metals market. You can reach Darren at dcapriotti@gold-eagle.com.