Investors were buying gold ETPs in the run-up to the US Presidential Election and immediately following the news of Donald Trump’s unexpected victory, but gold prices fell again as worries over the outcome of the election subsided.
ETF providers offering precious metals ETPs have seen a boost over the past month, as uncertainty once again reigned in global markets.
For example, Source has seen over $500m of inflows into its Source Physical Gold ETP between 1 October and 8 November, in the run-up to the US Election, suggesting investors were taking out insurance as America witnessed one of the most tightly-fought and unpredictable campaigns in its history. The firm said it has taken in more than $2.4bn into the product since the start of the year, more than doubling its total assets under management.
Meanwhile, iShares said it had seen elevated trading volumes in safe-haven assets, such as gold ETFs, following Trump’s win, with its Physical Gold ETC among the top ten most traded products within the range. On the 10 November, the day after the election result, the product had seen $140m of trading volumes, versus the average daily volume of $25m.
However, though BlackRock reports inflows into gold ETPs across the industry had accelerated in October, rising to $1bn, investors now appear to be taking money out of this area of the market as worries subside.
For example, Friday saw the shares of the iShares Gold Trust ETF go into oversold territory, according to Nasdaq. The gold price fell from a high of $1,333 per ounce immediately following Trump’s election on 9 November, to its current level of $1,219, nearly a 9% drop.
Further pressure on the gold price comes from a strong dollar and the expectations of an interest rate hike by the Federal Reserve in December. However, Trump’s plans to boost infrastructure spending could be good news for the safe-haven asset.
The question investors are asking now is: what is next for the gold price?
Joe Foster, portfolio manager and strategist for VanEck, told Professonal Planner that gold still has further to go in the long term, as the outcome of the US Election does not mark the end of uncertainty and market volatility.
However, the Wall Street Journal quotes Timonthy Major, a stockbroker focusing on precious metals at Paulson Investment, saying there is no “real strong cases” for gold now, as investors “have faith” in the dollar and the US economy.
Markets are still digesting the news of Trump’s victory and it remains to be seen what his policies will mean for the wider economy, so it seems safe-haven assets could go either way from here.
