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Gold unexpectedly drops on Fed news.
Published on 10.11.2016 21:57

The gold price has continued to tumble today going against most predictions that it would jump significantly on the back of a presidential victory by Donald trump.

At 6.41pm (GMT) gold was trading at $1,265 down from $1,277 in yesterday’s trading.

Just before the US presidential election, some had predicted that gold could push as high as $1,500 in the unlikely event that Trump would beat Clinton in the race for the white house.

 Concerns were raised on the back of Trump’s proposed radical policies which lead investors to believe that financial markets would be thrown into turmoil which usually sits well for gold.

Instead of the political uncertainty, traders have instead decided to focus on US monetary policy which includes whether the Fed will lift interest rates next month, which will make gold less attractive as it’s not an interest bearing investment.

“In the short term, gold may yet draw transient support from market uncertainty post-U.S. presidential elections”. Noted Harry Tchilinguirian and the commodities market team at BNP Paribas.

“But, we believe the longer-term downward fate of the yellow metal remains tied to Federal Reserve policy normalization and yield divergence that will drive dollar strength,” they added.

The probability of an interest rate rise may keep a lid on gold for the next month until the Fed’s policy meeting.

 

The material published in on this page is produced by the FIBO group companies, and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC; furthermore it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Andrew Masters

Analyst

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