Trump’s Win And Its Effect On Gold In The Short Term

Prior to the election, predictions ran high that a Trump win would send stocks plummeting – hence, gold would soar. However, that does not seem to be the case today.

One of the reasons why gold has historically proven to be so valuable to a balanced portfolio is its position as a countermeasure to the volatility of the securities market. When the world is in a state of upheaval, stock values are often driven down by the resulting market uncertainties and economic palpitations that can force investors to rethink their positions.

Market volatility – or the precept of general uncertainty, is one of the driving forces behind gold’s intrinsic value, and gold values were set to soar if the prospect of a Trump presidency showed any sign of coming to fruition. Now that Trump has been pronounced the President-elect, what happened to the gold rally that was supposed to happen?

Gold Pricing Trend

Since the evening of Election Day 2016 in the United States, the price of gold has dropped from around $1,280/ounce to right around $1,210/ounce – a 5.4% drop in just two weeks. Interestingly, when Trump announced his intention to run for the office of President on June 16th, 2015, the price of gold was $1,182/ounce, or within 2.3% of where it stands now. It reached a high point of about $1,360/ounce over the summer of ’16, right when the knock-‘em-out fight between Hillary Clinton and Donald Trump reached its most fever-pitched, indicating that the nation was probably quite nervous about the prospects of either of these two candidates.

Gold Outlook 2016 and Beyond

Gold prices didn’t immediately skyrocket on news of a Trump win, even though analysts were confident that gold would have seen some movement regardless of who won. Clinton likely would have moved legislation along that would have been inflationary to the U.S. economy – a move that probably would have contributed to higher gold valuations. And Trump was simply (and likely still is) seen as a market disruptor and someone who could potentially turn the entire domestic and global economy on its head. Gold prices react quickly to someone like that.

What’s in store, then, for 2017? Most analysts agree that the Trump win does present a greater sense of market insecurity, and that it should drive up gold prices in the short term. Prices in the high $1,200s per ounce are possible toward the end of 2016, with measured growth throughout the rest of the year. Since the inauguration won’t take place until January 20th of 2017, Trump’s true impact on the nation won’t be felt until sometime in the first quarter.

There are many who feel that Trump simply announcing his “First 100-Day” policies – many of them bound to be controversial in nature, will rev up market uncertainty and push gold prices continually higher. Regardless of the short-term pricing changes (gold should move up in valuation from here on out), gold remains the ideal long-term commodity that can help balance out any investment portfolio.

Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.