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Wednesday
Dec142016

Sprott's Thoughts Precious Metals Market Commentary

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.

Overview

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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