Fear of Trump sends gold flying above US$1,300 as investors seek safe haven

PUBLISHED : Thursday, 03 November, 2016, 12:30am
UPDATED : Thursday, 03 November, 2016, 12:30am

Donald Trump’s improving odds in the US presidential race are causing jitters in the market, prompting investors to seek safety in gold.

Bullion surged above $1,300 an ounce for the first time in almost a month after polls showed Trump gaining ground in next week’s elections, spurring a sell-off in world equities and industrial metals and weakening the dollar.

Trump led Hillary Clinton by one point in an ABC News/Washington Post tracking poll on Tuesday, while a Bloomberg survey of independents gave Clinton a slim advantage.

Gold has rebounded from a four-month low in October as political and economic uncertainty outweighed expectations of a Federal Reserve interest rate increase. In advance of an announcement from Fed policy makers Wednesday afternoon, traders were pricing in a 71 per cent chance that US borrowing costs will go up next month. Higher borrowing costs curb the appeal of non-interest bearing gold.

“There’s nervousness in the market over a Trump win and that’s driving gold higher,” James Cordier, the founder of Optionsellers.com in Tampa, Florida, said in a telephone interview.

“What usually happens is the candidate with the most momentum at the end is the one who wins and Trump definitely has momentum right now. It’s not what the market has been factoring in for the last 60 days.”

Gold futures for December delivery gained 1.3 per cent to $1,305.20 an ounce early on Wednesday on the Comex in New York, heading for the highest close since October 3. Silver futures advanced 1.4 per cent on the Comex.

Bullion’s rise has been boosted by Friday’s news that FBI Director James Comey had alerted members of Congress that agents had discovered a new batch of e-mails that could be part of an earlier investigation into Clinton’s use of a private e-mail system while she was secretary of state.

“What we’re seeing today is very much a safe haven trade with commodities getting hit hard,” said Naeem Aslam, chief market analyst at Think Markets UK Ltd. in London. “We had good numbers from China yesterday but that’s now been overshadowed by the risk of a Trump presidency, which hadn’t been priced in.”