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The gold price has dropped nine percent from its $1,337 per ounce high following the US presidential election.
It’s been a tumultuous week for the gold price, dropping to a five-month low on Thursday (November 17) on a stronger US dollar and continuing expectations the Federal Reserve will raise interest rates in early December.
Late Thursday afternoon, the gold price was $1,217.25 an ounce–a slight increase from the price earlier in the day. While many thought presidential-elect Donald Trump would send the gold price to $1,400 an ounce, it’s been quite the opposite.
According to an online publication, The Week, the yellow metal has dropped nine percent from its $1,337 an ounce high following the election of Trump as president.
Reuters reported that Trump “has vowed to boost economic spending.” As a result, precious metals analyst Bernard Dahdah told the publication that the yellow metal may have to wait until Trump takes office to see which policies he’s going to cancel.
When it comes to an interest rate hike, Federal Reserve chairperson Janet Yellen confirmed expectations on an increase.
The Wall Street Journal reported Yellen told lawmakers that a rate increase could come relatively soon, noting their next meetings will be December 13-14.
“At this stage I do think that the economy is making very good progress toward our goals, and that the judgment the [Fed policy] committee reached in November still pertains,” she said in the article.
Typically, interest rates don’t bode well for the precious metal, and its recent price drop has been telling.
On that note, Adam Koos, president of Libertas Wealth Management Group told Market Watch, “there is still plenty of potential turbulence ahead for gold, most importantly a potential for a hike in the Fed funds rate and continued strength in the U.S. dollar.”
However, others in the gold market aren’t as bearish on the gold price’s outlook: Alex Merk, president and CIO of Merk Investments told CNBC that inflation is going to rise more than interest rates, meaning the Feds could “be behind the curve.” If they are, Merk suggests, “gold is going to be just fine.”
Historically, investors flock to safe haven assets like gold during times of uncertainty, and Merk told CNBC that the uncertain environment will “likely keep gold afloat.”
While it’s still two months before Trump takes office, investors will be surely keeping a watchful eye on whether interest rates will go up and how it will affect the gold price.
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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.
