Analysts turn cautious on gold; metals rally THE RED ALERT
After Trump won the US presidential election, there is policy uncertainity on many issues
Analysts are becoming cautious on gold and metals markets after the US presidential election, wishing to see what policy emerges from the new administration.
There is policy uncertainty on many issues. For instance, on the proposed Trans-Pacific Partnership and other such multilateral agreements, on US interest rates, tax cut and a term extension to US Federal Reserve head Janet Yellen. Gold is seen a buy on dip market with focus shifting back to Federal Reserve’s stand on interest rates and metals may see profit booking and hedging by miners at higher levels with futures direction depending more upon on China.
On the first signals of Trump gaining in the election, the price of gold rebounded sharply in the global market, from $1,270 to $1,337 an ounce. After Trump was declared winner, heavy profit booking in gold brought prices back to $1,280. GFMS Thomson Reuters in its analysis on gold after the results, said: “It'’ a buy in dip market now.”
In India, prices fell sharply. Most short sellers were caught; later, many who’d Price movement of precious metals Gold $/oz Silver $/oz Gold (~/10G) Silver (~/Kg) Brent Crude Spot ($/BBL) Copper Zinc Nickel Lead Aluminium squared their positions got a jolt when they saw gold falling apart.
On metals, when asked, Andrew Cole, principal analyst at the Londonbased Metal Bulletin Research told this newspaper: “Metals have been rising since last week and got a further excuse to move up from the Trump victory, where he had promised to spend massively to overhaul the country’s transport, telecommunications, water supply and electricity infrastructure. That sounds like a boost for metal demand.” Adding, however: “After all, a Trump presidency does bring a lot more uncertainty to global markets and in the longer term, we have to wait and see what a Trump presidency really means for metals’ fundamentals. So, prices probably have to correct this rapid advance at some point, as there is a lot of selling potential out there.”
According to him, the underlying trend supports bulls as, “China is looking more stable, supply-demand balances are looking tighter and investors returning to commodities having recognised that the asset class has begun its next cyclical upswing.”
The Mexican peso plummeted 13 per cent, taking silver in local terms to test a high posted twice this year already, back at February 2013 levels. Mexico is the world’s largest silver producer, with 21 per cent of mine production. On Thursday, it was trading at $18.74, even as gold fell below $1,280 an ounce. The GFMS report notes, “President-elect Trump appeared to adopt a more conciliatory tone in his initial remarks than in the oh-so-combative presidential election campaign but the markets will need more guidance before they can settle. In the short term, therefore, further volatility and risk-off activity could easily prompt further gains in the gold price. For the longer term, the picture is more hazy but points overall to further bullish action. This, though, is more likely to be on the basis of bargain hunting into dips than a headlong pursuit of higher prices.”