Gold Price Under Pressure

- November 14th, 2016

Following the presidential election, the gold price has dropped to a five-month low.

In a shocking turn of events, the gold price has dropped to a near-five month low following the outcome of the US presidential election.
The significant price drop has turned heads for a number of reasons. When the yellow metal soared to $1,336.20 per ounce on the evening of November 8, it appeared as though many predictions were turning into  a reality; a Donald Trump presidency was pushing gold up as investors flocked to the precious metal as a safe-haven asset.
What’s more, as it became clear that Donald Trump would become the next president elect, many were comparing the election to the United Kingdom’s decision to leave the European Union, and the gold price at the time reflected that. What’s more, many were projecting a Trump win to push the gold price as high as $1,400 an ounce–instead, it’s gone in the opposite direction.
So, what’s caused the yellow metal to drop so much since then?

Gold price: five-month low

Nearly a week after the election, on Monday morning (November 14), gold dropped to $1,212.50 per ounce. By the afternoon it had gained slightly, rising to $1,220.00 per ounce as of 4:56 p.m. EST.  According to the Wall Street Journal, the gold price fell to an overall five-month low on pressures of a stronger US dollar and concerns of the Federal Reserve raising interest rates in December.
Of course, it’s natural for the yellow metal to drop when the dollar is surging; according to analysts at Commerzbank, “gold is still facing considerable headwind: the US dollar is continuing to appreciate.”
But–how significantly low the gold price has been post-election has raised questions among many analysts, Market Watch notes. The online publication suggests that the prime minister of India, Narendra Modi allegedly directed 500 and 100 rupee notes to be banned–which are the highest valued and most used banknotes in India–with 28 percent of the notes apparently being fake.
While some say the note ban has benefited the gold price, the Market Watch post suggest it’s one reason why the yellow metal’s price has crashed.

Where will gold go?

Analysts over at Investing.com have taken a bearish outlook on the gold price, projecting it could call below $1,000 an ounce in 2017. They do note, however, that gold rises as inflation expectations rise, but also when investors flock to the yellow metal as a result of fears within the markets.
“If there is some inflation, gold seems to act as a fear asset at this point, and investors should respect that signal,” the article suggests.
On that note, experts in FocusEconomics‘ November 2016 Consensus Forecast have varying opinions on the direction of the gold price: some suggest the price to average $1,375 in the fourth quarter of 2016, while the4 majority see the  yellow metal averaging below $1,300 an ounce. Looking ahead to 2017, the panel overall sees the gold price averaging $1,315 per ounce in the fourth quarter.
Surely, it will be an interesting–and volatile–time in the gold market, and investors will no doubt be watching it carefully.
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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.

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