Gold dropped to a five-month low Friday as the post-Trump price surge collapsed and investors digest the impact of the vote on global financial markets.
Gold for delivery in December dropped to a session low of $1,223.40 an ounce in another morning of heavy trading on the Comex market in New York, down over $40 an ounce or 3% from Thursday’s close.
The metal touched a high of $1,338 late on Tuesday as results showed a likely Trump victory, but the rally in record volumes for the Comex market, soon evaporated.
Gold’s performance is in stark contrast to predictions ahead of the election with many analysts seeing gold reaching $1,500 or beyond, citing increased safe haven buying as a major reason behind an upswing.
Ole Hansen, head of commodity strategy at Saxo Bank, published two charts on Friday that help to explain to post-Trump slump:
The rise in bond yields is not good for gold unless accompanied by a similar rise in inflation. The chart below shows that the move so far in 10-year bond yields has seen the real yield rise to 0.25% – the highest level since June.
Low real yields have provided a major source of support for gold this year, but depending on inflation expectations, this source of support has at least for now been sharply reduced.
Rising US bond yields and the brewing emerging markets crisis has seen strong demand for dollars post the election, and this marks yet another gold-negative development.