Although the gold price surged to its biggest one-day rally since Brexit as Donald Trump won the US presidential election, the price cooled down on Wednesday.
The gold price lost some steam on Wednesday (November 9) in the aftermath of Donald Trump’s shocking victory as the US president elect. As of 9:49 p.m. EST, the gold price was $1,286.48 per ounce.
However, as the election results poured in Tuesday evening (November 8), the gold price surged to its highest level in over five weeks to $1,336.20 per ounce, its biggest one-day rally since Brexit. The silver price also made small strides, rising to $18.92 on Tuesday night, but dropped slightly Wednesday to $18.43 per ounce.
With Trump as the newly elected president, many are comparing the election to the United Kingdom’s decision to leave the European Union. With that in mind, during times of economic and political uncertainty and when the markets fluctuate, investors flock to safe-haven assets like gold–and silver–for protection.
“Investors will likely be looking for uncorrelated, safe haven assets as it searches for ways to insulate their portfolio from possible tail risks related to a Trump presidency,” Shree Kargutkar, associate portfolio manager at Sprott Asset Management told Market Watch.
Although the gold price dropped the morning after the election, it is expected to continue its rally as investors continue their march towards safety.
A note from BMI said the election victory will “buoy gold prices” in the coming days, which will impact other commodities in a negative light.
“Looking longer term, this poses upside risks to our already bullish gold price forecast in 2017,” the note said.
On the commodities side, the Wall Street Journal reported on Wednesday that analysts expect the markets will continue fluctuating and Trump’s opposition to international trades could potentially slow global economic growth.
“Uncertainty about who is going to be president has now been replaced with risk and that will hit every asset class including commodities,” Neil Williams, chief economist at Hermès Investment Management told the Journal.
While it’s inevitable that the markets will remain uncertain for an undetermined amount of time, short-term speculation will be turned towards the Federal Reserve and whether or not interest rates will be raised in December.
On the other hand, in a note from Cantor Fitzgerald, experts suggest a hike in interest rates will “likely fall to zero” caused by uncertainties involved in Trump’s win, and an increase in 2017 will substantially decrease.
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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.