'Red Sweep' Sinks Gold to 3-Week Low, Silver -5% as 'Trump Trades' Jump
Wednesday, 11/06/2024 14:44
GOLD SANK and silver plunged on Wednesday as 'Trump trades' the US Dollar and New York stock market leapt alongside longer-term Treasury debt interest rates on the ex-President beating Kamala Harris in the 2025 White House election and his Republican Party winning a Senate majority.
Crypto-currency Bitcoin jumped over 7.0% to new all-time highs above $75,000 while crude oil fell $1 and industrial metal copper sank over 4.0%.
Betting on tomorrow's Federal Reserve decision meantime continued to back a quarter-point cut in overnight borrowing costs.
"Markets call a Republican clean sweep," says Dutch bank ING, with "Trump trades pricing in that the Republicans will also control Congress, but the House race remains very close" after the clear Donald Trump defeat of Democratic candidate Harris.
"Gold did get the knee-jerk drop [we predicted]," says Rhona O'Connell at brokerage StoneX, "but medium term remains bullish."
"A resounding Trump victory is a catalyst in the medium term to sell gold and buy or just hold more white metals," says Nicky Shiels at Swiss bullion refining and finance group MKS Pamp, pointing to more
industrially-useful silver, platinum and palladium.
Short-term however, the PGMs fell 3.5% and 4.5% respectively on news of Donald Trump's win, while silver lost 5.1% to trade beneath $31 per Troy ounce for the first time since mid-October.
Gold lost 3.0%, also hitting sudden 3-week lows with a fall from $2744 to $2660 per Troy ounce.
S&P500 futures contracts in contrast put the US stock index 2.2% higher, with shares in Tesla Inc. (Nasdaq:TSLA) – the only listed equity among the 6 companies controlled by billionaire Trump campaigner and fund-raiser Elon Musk – up 11.9% before the open.
Already rising ahead of Wednesday morning's win for Donald Trump, the US Dollar's DXY index leapt almost 2.0% to trade at its highest level against other rich-economy currencies since the start of July.
Faced with 60% trade tariffs under Trump, export-giant China saw its Yuan currency drop to end-August levels against the Dollar, helping keep Shanghai gold prices little changed overnight after 4 days of losses but widening the discount to global quotes for London settlement to $30 per Troy ounce.
That matched the
biggest disincentive for new bullion imports into gold's No.1 consumer nation since start-October's 4-year record.
Faced with 10% trade tariffs under Trump, along with the rest of the world, Eurozone and Japanese exporters meantime saw their currencies sink to 4.5-month and 3-month lows respectively.
That helped gold in Euro terms hold firmer, spiking to €2552 as the US presidential vote became clear – 1.0% beneath last week's new peak – before reversing that move and more at 3-week lows of €2483.
The UK gold price in Pounds per ounce fell to trade below £2100 for the first time in almost 2 weeks and then dropping to £2070, down 4.1% from
last Thursday's fresh all-time UK gold high.
"Commodities are mostly down across the board today which is very odd because if Trump is inflationary, its good for commodities," says Shiels at MKS Pamp.
"The tariff threat is perhaps spooking cyclical commodities, but those dips are opportunities given inflationary Trump policies [and] reactionary Chinese stimulus."
"Recent data out of the US have pointed to a greater likelihood of a 'no landing' scenario," says Swiss banking giant and London bullion market maker UBS, meaning "benign GDP growth with inflation close to the Fed's target and growth at/above trend.
"Additionally, we expect lower interest rates – not least in China – to kickstart a modest recovery in global manufacturing, which adds to silver's industrial demand potential…heavily used by the tech and electric vehicle sectors."
Longer-term rates in the US bond market leapt Wednesday however – one of the 'Trump trades' widely expected to benefit from the re-elected President pushing inflation higher through trade tariffs, lower taxes and higher government budget deficits.
Two-year Treasury yields jumped to the highest in 3 months at 4.30% per annum, while 10-year yields leapt almost 20 basis points to the highest in 4 months at 4.48%.
The Fed is universally expected to cut its overnight target rate from 4.83% to 4.58% at Thursday's meeting.
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