Gold sags to end wild week as forecasters get it utterly wrong

[SINGAPORE] Donald Trump was meant to be gold's best friend, stoking uncertainty and adding a powerful rationale for holding the haven. Now he's President-elect, the Republican is a bane for the metal on speculation his policies will boost the economy, aiding equities and the dollar.

Bullion for immediate delivery traded little changed at US$1,259.97 an ounce at 12:09pm in Singapore, set for a 3.5 per cent weekly loss, the most since the period to Oct 7, according to Bloomberg generic pricing. Prices sank 1.5 per cent on Thursday to end at the lowest in more than three weeks as the Dow Jones Industrial Average gained to a record and the greenback climbed.

Gold forecasters framed a possible Trump victory before the ballot as a catalyst for gains, with a Bloomberg survey suggesting a rally to US$1,395, and a selloff likely only if Hillary Clinton prevailed.

Prices did surge on Wednesday as the result came in, then reversed course as investors embraced risk. Adding to gold's headwinds are expectations the Federal Reserve will hike rates, with traders seeing an 80 per cent chance of a rise next month.

"Lower taxes, regulation and an increase in fiscal stimulus could provide a boon to the US," Paul Hissey, an analyst at RBC Capital Markets in Melbourne, said in a note received on Friday.

"A stronger US economy in the near-term is likely to see a continuation of pressure on the gold price."

Goldman's View

While planned spending on infrastructure by the Republican will support construction activity and benefit commodities such as steel, nickel and zinc, the outlook for gold is mixed, according to Goldman Sachs Group Inc.

Bullion may be supported by fiscal and geopolitical uncertainty, but stronger growth could be bearish for prices, the bank said on Nov 9.

Billionaire investor Stanley Druckenmiller said he's sold all his gold amid optimism the new administration will bring deregulation and tax reform, spurring growth. Those benefits should outweigh concerns about protectionist trade policies, he said in a CNBC interview on Thursday.

Federal Reserve Bank of St Louis President James Bullard on Thursday signalled the US central bank will probably enact the first rate rise of 2016 before the year-end.

"We are basically on track, the same way we were before the election," he said.

"Our view has called for a single rate increase and I think December would be a reasonable time to implement that."

Traders had piled into bullion the week before the election day amid bets that a Trump victory would trigger a flight to safety. As they began to assess some of the policies he may implement, holdings in exchange-traded funds backed by the metal fell 16.2 metric tons to 2,040.6 on Thursday, the biggest drop since Oct 21, data compiled by Bloomberg show.

Bullion of 99.99 per cent purity sank as much as 2.3 per cent to 276.1 yuan a gram (S$57.07 a gram) on the Shanghai Gold Exchange.

On global markets, spot silver fell 0.4 per cent, paring a fourth weekly gain that's the longest streak since July. Platinum lost 0.5 per cent, while palladium added 0.3 per cent.

BLOOMBERG