Gold is Certain Winner Following Presidential Elections – HSBC

Release Date: 
Friday, November 4, 2016

Gold prices rose sharply this week cresting the $1300 mark as political turmoil sent investors to gold.

“Gold steadied on Friday, heading for its biggest weekly rise since mid-September as jitters over next week's U.S. election offset a solid payrolls report that shored up expectations for a U.S. interest rate hike next month…

“The FBI announcement on Friday narrowed Clinton's lead over her Republican rival Donald Trump, polls showed, rattling financial markets which had been pricing in a Clinton victory. That helped send gold to a one-month high on Thursday, and has put it on track to rise 2 percent this week.

“’Gold implied volatility rallied sharply across the curveover the past week, as investors rotated to safe haven assets after polls tightened,’ Citi said in a note. ‘As the election keeps driving gold prices in the short-term, we expect gold volume to remain elevated into Election Day….’” (“Gold Steadies As U.S. Election Jitters Offset Solid U.S. Data,” Kitco News, 11/4/16.)

Gold ended the week up $29.30, closing at $1,305.00. Silver prices closed at $18.51, up $0.68.

Gold Is Certain Winner Following Presidential Elections – HSBC
Although the presidential election is less than a week away, banking giant HSBC has declared gold the winner regardless of who is elected.

“There's one certain winner of next week's presidential election, according to HSBC Holdings Plc: investors in gold. Although they deem a Donald Trump victory more supportive for the price of the metal than a win by Hillary Clinton, the bank's Chief Precious Metals Analyst James Steel says it'll enjoy at least a 8 percent jump whoever wins the race…

“Both candidates have espoused trade policies that could stimulate demand, with gold offering a potential "protection against protectionism," he says. Even the relatively more internationalist Democratic candidate has argued for the renegotiation of longstanding free-trade agreements. That's positive for gold — even if  ‘not on the scale of Mr Trump’s agenda.’

“If the real-estate magnate triumphs, gold could rise to $1,500 an ounce…  If Clinton wins, the price of the metal could improve to $1,400 an ounce by year end, Steel writes, adding that a Democratic sweep of Congress would further stoke demand for the metal owing to a possible boost in fiscal spending….” (“Buy Gold No Matter Who Wins the Election, HSBC Says,” Bloomberg, 11/1/16.)

Fundamentals Perfectly Aligned For Higher Gold Prices – Bristow
Randgold Resources CEO Dr. Mark Bristow believes the long-term fundamentals are “perfectly aligned” for constantly increasing gold prices.

“Gold’s long-term fundamentals are perfectly aligned for a constantly increasing price, starting six to nine months out. This is because the gold mining industry has gone ex-growth. An increasing number of analysts are reaching the conclusion that new gold supply is under threat and some forecasts show 2025 as having 30% less gold…

“’ That’s great for gold,” Randgold Resources CEO Dr Mark Bristow commented… It’s only upside for us,’ said Bristow. Even the short term is a dynamic time for the gold price. ‘You’ve got this hung decision on interest rates from the Fed, the ‘Goon Show’ of the American presidential election with everyone speculating what the outcome is going to do to the economy of America, and subsequently the dollar price, and therefore the gold price… But in the long-term, the fundamentals are perfectly aligned for a constantly increasing gold price and I’m talking starting probably six, nine months out, because this industry is ex-growth….’” (“Gold’s fundamentals perfectly aligned for constantly rising price – Bristow,” Mining Weekly, 11/3/16.)

“Shocking” That Investors Don’t Have Portfolio In Physical Gold - Naylor-Leyland
Ned Naylor-Leyland, manager of a precious metals’ fund, told conference attendees that all investors should have a formal allocation of physical gold in their portfolios.

“The fact Western investors are not holding physical gold as a formal allocation in the current market is shocking, according to Old Mutual Global Investor’s Ned Naylor-Leyland.

“Speaking at an alternatives briefing, Naylor-Leyland, who runs the newly-launched Old Mutual Gold and Silver fund, said investors should ignore what central banks are saying about gold and focus on what they are actually doing.

“‘It is all stage magic, central banks have forced people to listen to what they say, meanwhile, investors are not watching what they are doing, which is buying gold. ‘Central banks own gold and understand why you need gold. Gold has been stuck in the alternatives category when it should be there as a fixed allocation.”

“Naylor-Leyland said studies have shown that investors should have a 2-5% allocation to gold bullion at all times, he currently has 18.6% allocated to bullion* … ‘We think it is important investors have a physical allocation to gold because it enhances the liquidity of a portfolio…

“Naylor-Leyland believes investors should look to China when it comes to gold, a country which currently has over 100,000 bullion outlets… These secular trends are important, Asian investor know the difference between gold and government paper , which is why they invest in gold. Gold clearly pivots to the dollar but you shouldn’t overlook the relative depreciation over the long term of individual currencies.’” (“Why investors should avoid central bank ‘stage magic’ and buy gold,” CityWire Selector, 11/3/16.)

Investors Should Own Gold For Its Insurance Qualities – UBS
Wayne Gordon, investment strategist at UBS Wealth Management, told Bloomberg TV that he recommends investor own gold for its qualities as investor insurance.

“We’ve liked the insurance factor of gold now for almost a whole year. When we first look at gold as an insurance play, it was when China was dipping into what we thought was a hard landing… Since then, we’ve cut a whole bunch of Fed rates hikes out and we have instability on the political front both in the U.S. and Europe… So, for us, the insurance quality of gold has been there for quite some time and we continue advocate that… We clearly think the weight is pushing up on gold in the next six to twelve months and that’s partially linked to the Fed. So the Fed is going to go slow … they’re going to turn the screws but do so slowly which means real interest rates are going to go negative and that is the real driver for gold here….” (“UBS Gordon: Why You Should Own Gold,” Bloomberg.com, 11/2/16.)    

*Goldline believe that precious metals are appropriate for 5% to 20% of an investment portfolio

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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