Gold tumbles, euro jumps in wake of first round elections in France

PUBLISHED : Monday, 24 April, 2017, 9:21am
UPDATED : Tuesday, 25 April, 2017, 7:47pm

Gold suffered its biggest drop in two months on Monday while the euro shot to a five-month high on indications pro-growth independent centrist Emmanuel Macron has taken the lead in the first round of voting in the French presidential election.

Macron has taken the lead with 24 per cent of the votes in the election held Sunday, ahead of far right nationalist Marine Le Pen with 22 per cent. They beat out the other nine candidates and will face off in the second round of elections on May 7. The poll also showed Macron edging out National Front leader Le Pen, putting him odds on favourite to become the next president of France.

Gold fell as much as 1.5 per cent to US$1,265.51 per ounce in early trading on Monday in Asia before paring back the drop to US$1,271 in the evening in Hong Kong.

The euro also rose to a five-month high of US$1.085 per euro in the evening.

“The market was worried over an election victory by Marine Le Pen would as she is anti-euro. The election now shows Emmanuel Macron has the biggest chance to win and he has shown support to France to remain in the EU,” said Jasper Lo Cho-yan, chief strategist at King International Financial Holdings.

“However, the gold price should bounce back soon as the Italian presidential election is coming while the political tensions between the US and North Korea has not been resolved. We also do not know if Marine Le Pen will win in the second round of elections. Investors still need to be cautious,” Lo said.

Stephen Innes, senior trader at Oanda, said the euro rose to five-month high as investors unwound short positions.

“Flow has been completely dominated by euro and euro crosses, but with the European Central Bank meeting later this week there may be some apprehension to chase this move higher,” Innes said.

“In addition, there could be a stutter step that may temper the euro against the US dollar from moving much higher, given the looming second round of elections, and in its face we could start to see greater risk premiums build.”

Innes said markets will also pivot to President Trump and issues involving tax reform after the US President unexpectedly said on Friday at a Treasury Department event that there would be a big announcement on Wednesday.