UNITED STATES November 03 2016 10:12 AM
NEW YORK (Scrap Register): Gold, silver and copper futures prices at New York Mercantile Exchange advanced on Wednesday as growing uncertainty surrounding the US presidential election as well as weakness in the US Dollar.
The most active December Gold contract on the COMEX division of the New York Mercantile Exchange advanced by $20.20 an ounce to $1,308.20 an ounce on Wednesday.
The most active December silver contract on the COMEX division of the New York Mercantile Exchange advanced by 27.5 cents to $18.693 an ounce on Wednesday, after climbing 3.5% on Tuesday. The December delivery of copper rose by less than half a cent to $2.231 a pound.
According to optionsXpress, the US dollar has softened ahead of the US presidential election, helping boost gold. Large speculators had been adding to net-long positioning in the greenback prior to the recent sell-off in the currency.
“The recent rally in the value of the US dollar versus a basket of major currencies, which arguably started in early May, is beginning to wane as traders begin to close out dollar positions as the US presidential election nears,” said Mike Zarembski, senior commodities analyst.
“As recent polls suggest a close race between Democratic nominee Hillary Clinton and Republican nominee Donald Trump with less than a week until the election, the uncertainty as to who the next US president will be has skittish traders exiting long dollar positions, with is giving support to both the euro and to a lesser extent the Japanese yen the past few trading sessions,” Zarembski added.
Recently stronger economic data out of Asia have also helped undercut the dollar, he adds. ”One market that is seeing support from both the recent dollar weakness and uncertainty in the US elections is gold, where prices have rallied nearly $50 per ounce the last four weeks,” Zarembski noted.
“Gold prices tend to benefit from a lower US dollar and given the tendencies of some traders to move into gold as a ‘safe-haven’ trade during times of uncertainty, it appears that the gold market is starting to see some asset inflows the past several days.”
Zarembski cautions, however, that the dollar could still get a boost from expectations that the Federal Reserve will hike interest rates in December.
According to brokerage SP Angel, precious metals, as well as base metals, have drawn strength lately as US election polls lead to weakness in the US Dollar.
Voting polls indicate a potentially close call in the US (presidential) election, raising the possibility of a (Donald) Trump victory. The US dollar is taking fright over this uncertainty and is more likely to recover if Hillary Clinton takes the lead. Markets are bracing for a rise in the potential for a Trump victory, with funds moving into hard assets.
A Trump victory would bring economic and political uncertainty and would likely cause longer-term flight of capital out of the USA and out of the US dollar This is good for metals prices and it may be that Trump will move decisively to stimulate new infrastructure and house building (more Trump Towers); it is, after all, what he knows best. Although modestly lower so far Wednesday, Comex December copper futures have trended higher over the last week.