It’s been just shy of a month since our last “post-election” market update and given the recent developments across markets, it seems a pertinent time for an update regarding our thoughts on the precious metals market.
For those after the short version, the take home points are as follows:
Momentum is firmly to the downside in the gold price at present, but;
The gold miners have held up much better and have held support, for now. This kind of “bullish divergence” often hints at price action to come (bullish).
We believe the key forces influencing gold are a) real yields and b) the dollar, both of which broke out topside (bearish) following trumps victory.
In the very near term, real yields as measured by 5 year TIPS, have rolled over following the Trump rally, whilst the dollar continues to move higher. This sets up a possible “tug of war” on the gold price.
Overall, there is a mix of bullish and bearish indicators in the gold space, making near term predictions difficult.
The Fed rate decision to hike just came out - prices are likely to see big swings directly post announcement.
For those looking to hedge their gold portfolio, the best bet right now looks to be in the currency markets, with a short on key dollar constituents.
For those after some more detailed reading, see below for a more detailed analysis of the current setup.
Contrary to the pre-election consensus, Trump's victory has been negative for gold, at least in the short term. Since his election on November the 8th, price has declined from a peak of $1,336 to where it’s currently trading at $1,170 – a drop of $166 or 12.5%.
Since the election,
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