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Trump presidency unlikely to lead to sustainable gold rally

While many commentators have predicted a surge in gold prices if Donald Trump wins the U.S. election in November, it is unlikely to deliver a sustained rally, according to delegates at the Precious Metals Investment Symposium in Sydney, Australia.

“From an event-risk perspective, an outlier outcome, like Britain voting for Brexit, Trump getting in would likely add some short-term upside volatility to the gold price,” ABC Bullion chief economist Jordan Eliseo told SNL Metals & Mining on the sidelines of the Precious Metals Investment Symposium.

“People will think this adds to uncertainty, you’ll probably see share markets come off a little bit, you’ll probably see gold prices move higher, but the reality is the gold price and the primary bull market in gold is not in any way reliant on outlier events like Donald Trump getting into the White House.”

Gold has come off a high of just under US$1,370 an ounce in early August and is trading at about US$1,250 an ounce.

According to Eliseo, over the last couple of weeks, fears over a Trump presidency have been “priced out of the market.”

“The primary drivers of gold are concerns regarding the economy and rising debt to GDP ratios, concern regarding financial market stability and also overvalued financial markets both in stocks and in bonds,” he said.

“Irrespective of who wins in November, those factors are all still there. Interest rates will still be effectively zero in the U.S. and negative around the world, U.S. debt levels — national debt — will still be circa US$20 trillion and it is concerns regarding those things that are the key drivers of gold."

“Whether Clinton or Trump ends up in the White House will make very little difference to the overall trajectory.”

The CEO of The Perth Mint in Australia, Richard Hayes, agrees that a Trump victory will likely only spur gold in the short-term.

“Given what’s transpired over the past two or three weeks with Trump, especially some of his comments over the weekend and a lot of GOP delegates withdrawing support for him, I would think that a Trump victory would be good for gold, certainly in the short-term,” he told SNL.

Demand for gold has been subdued in the second half of 2016, which Hayes puts down to a lack of Chinese buying and investors waiting for the outcome of the U.S. election.

“What we’re seeing is a lot of uncertainty in the run-up to the U.S. elections,” he said. “A lot of investors are just waiting to see what is going to happen with that."

“I was in the United States probably five or six weeks ago. I spent a week there talking to a whole range of our clients and customers and also some banks as well and the view very much from them is everything is just in a bit of a holding pattern at the moment.”

Meanwhile, Lion Selection Group director Hedley Widdup told SNL that Trump will be “good for gold.”

“Trump will be very good for gold I think,” he said. “Hillary, I don’t think she’s going to destroy it, but she will be more of the same as the Obama administration I suspect and that will probably push towards a slower revitalization of the American economy, which is on the track that they are on."

“Now Trump could push that in all sorts of different directions, but I think the instantaneous reaction will be canned food, shot guns and gold.”