By Kitco News
Monday November 07, 2016 14:30

(Kitco News) - It’s too soon to discount gold even as prices fall nearly 2% Monday on abating election jitters, according to some analysts.

Sunday, the FBI came out and said that after reviewing newly discovered emails, it continues to recommend not pursuing charges against Democratic presidential candidate Hillary Clinton.  The news provided some relief for the Clinton campaign, which saw its lead against Republican candidate Donald Trump fall sharply when the FBI first announced the discovery of the emails.

Since the FBI’s latest disclosure, there has been a pickup in “risk-on” sentiment that has pushed U.S. equity markets up almost 2% across the board and drove gold prices down, below the key psychological level of $1,300 an ounce.

Although financial markets are pricing in a Clinton victory, some analysts said that there is still plenty of uncertainty that will help gold in the medium term. Analysts are expecting the election to come down to the wire, which could lead to the loser disputing the results.

In a recent interview with Kitco News, Simona Gambarini, commodities economist at Capital Economics, said that a contested election could drive gold prices to $1,350 an ounce, up more than 5% from gold’s current price.

In an outright Clinton win, Gambarini said that she would expect gold prices to fall to $1,250 an ounce and in the face of a Trump victory, the metal would push to $1,400 an ounce.

Economists at CIBC World Markets also argued that a contested election would ultimately be good for gold.

The analysts at the Canadian bank said,, “the world stood still for a month,”  following the 2000 presidential election between George W. Bush and Al Gore, while the election results were eventually challenged in the Supreme Court. The analysts noted that the S&P 500 traded lower and gold pushed higher in the one-month period following the Bush/Gore election.

“Given Trump’s statements on ‘vote rigging’ over the past weeks, it is reasonable to assume that legal challenges are a real possibility in anything other than a clear win for Clinton (or Trump),” they said in their report released Monday.

“Given the bombastic nature of Trump’s election campaign, we would expect a period of uncertainty to be more negative for equities and supportive of gold. This could be as unsettling as an outright win for Trump.”