By  Neils Christensen of Kitco News

Monday  October  10, 2016 14:24

(Kitco News) - Gold had its worst week in more than three years in part because of a stronger U.S. dollar; however, one research firm expects the greenback’s strength to be only short term.

Monday, the U.S. Dollar Index, hit 96.93, its highest point since late July; at the same time December gold futures settled the session at $1,260.40 an ounce, up 0.67% on the day and above a key support level at $1,250 an ounce.

In a research note Monday, analysts at U.K. research firm Capital Economics, said that they expect the U.S. dollar to weaken through to the end of the year, especially if Republican presidential candidate Donald Trump wins the election in November. 

“The heightened economic and geopolitical uncertainty that would follow a victory for Donald Trump in November’s U.S. presidential election would surely see the dollar weaken against traditional safe havens such as the Japanese yen, and the price of gold would jump,” the analysts said in the report.

The comments come the day after the second presidential debate; where Trump earned credits for being able to rally his base but his performance, was not strong enough to sway undecided voters, according to some political pundits.

Not only does Capital Economics expect to see increased market turbulence but they note that it could be enough to keep the Federal Reserve from hiking interest rates, which would also be positive for gold, which has rallied this year because of the current low rate environment.

It is, of course, hard to be sure what a Trump presidency would actually mean. Many of his economic policy proposals are vague or inconsistent. There would also still be time for him to clarify or moderate his more extreme positions before taking office. And if he does win, he would presumably have overcome many of the doubts of US voters. But there can be little doubt that a Trump win would initially be negative for sentiment in global financial markets given the low regard in which he is held overseas,” the report said.