Trump Win Fuels Surge in US Dollar, Gold and Silver Prices Fall

What was expected to be a highly contested election between former US President Donald Trump and Vice President Kamala Harris was anything but, with the outcome being called early on Wednesday (November 6).

The results will have wide-reaching implications for the US and global economy as Trump ran on a platform of lowering taxes, raising tariffs and sweeping immigration reforms that could see millions of people deported.

His win comes ahead of the latest Federal Open Market Committee meeting, which is scheduled to wrap up on Thursday (November 7). The central bank is widely expected to cut interest rates by 25 basis points.

The Fed has been locked in a battle against inflation and only began lowering rates in September, when it made a cut of 50 basis points. Economists have expressed concerns that inflation will worsen under Trump.

Bond yields rose in reaction to the president-elect's victory, with the benchmark 10 Year Treasury rising 4.43 percent on Wednesday to reach its highest level since July. Sentiment pushed yields higher under the expectation that Trump's economic policy plans will require the federal government to take on increasing amounts of debt.

Before the election, it was widely expected that a Trump victory would fuel momentum in the US dollar, and that prediction came true in the immediate aftermath, with the US Dollar Index surging more than 1.5 percent to 105.18 as early results began to come in on election day. It remained in the 105 point range throughout Wednesday.

The post-election boost failed to carry over into precious metals markets, with gold retracting between 1 and 2 percent. The metal lost 2.8 percent on Wednesday, falling below US$2,700 per ounce for the first time since October 17.

Silver also saw a significant pullback, dropping 4.3 percent to US$31.23 per ounce by 3:30 p.m. EST.

Base metals fared no better, with copper shedding 4.7 percent on Wednesday to trade at US$4.28 per pound on the COMEX. For its part, the more broad S&P GSCI (INDEXSP:SPGSCI), which acts as a benchmark for commodities performance, recovered from steep declines in morning trading and was down just under 1 percent at 541.25.

Global equity markets surged in the immediate aftermath of Trump's victory, but finished mixed, with the UK’s FTSE 100 (INDEXFTSE:FTSE) gaining 1.55 percent in early trading there before retracing to finish the day at 8,166.68. The German DAX (INDEXDAXP:GDAXI) saw similar gains in early trading before falling back to close 1.13 percent lower at 19,039.31. Meanwhile, Tokyo’s Nikkei 225 (INDEXNIKKEI225:N225) rose 2.61 percent to close at 39,480.45.

US markets all saw substantial gains in Wednesday trading, with the S&P 500 (INDEXSP:INX) jumping 2.43 percent to 5,923.58, the Nasdaq-100 (INDEXNASDAQ:NDX) up 2.58 percent to 20,750.1 and the Dow Jones Industrial Average (INDEXDJX:.DJI) increasing 3.47 percent to a new record high of 43,685.92.

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Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.