The SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) have been plagued recently by the strengthening U.S. dollar and ongoing speculation that the Federal Reserve will raise interest rates in December.
With Election Day drawing near, there is some hope for a near-term rally in gold and the related exchange traded products, but recent polls suggest that hope is faint. Said differently, many gold market observers are bullish on the yellow metal should Republican nominee Donald Trump emerge victorious.
Unfortunately for gold bugs, polls show Democratic nominee Hillary Clinton widening her lead over her Republican rival.
Investors have flocked to U.S. Treasuries and bond-related exchange traded funds in a world of negative-yielding sovereign debt. However, with U.S. Treasury yields hovering around three-decade lows, government debt looks pricey and fixed-income investors are now exposed to greater risks.
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Interestingly, safe-haven Treasuries are also seen as vulnerable to a Trump victory, along with stocks, leaving gold as potentially the last asset class that could immediately benefit from a Trump win.
Investment in gold jumped to 448 metric tons in the second quarter, or more than double the figure of the same period year-over-year, largely due to a year-over-year increase in ETF investment to 236.8 metric tons, compared to a 23 metric ton outflow the year prior.
[related_stories]The thesis behind gold getting a boost from a possible Trump victory revolves around the idea that Trump being the next president is widely viewed as negative for other asset classes, including bonds and equities. That leaves gold and safe-haven currencies as potential beneficiaries should Trump pull off the upset.
“The markets and polls believe Clinton will win and that is priced into markets in the same way that a ‘Bremain’ was priced into markets prior to the ‘Brexit’ vote,” reports ETF Daily News.
SEE MORE: Analysis – Silver ETFs Are Outshining Gold
“Some say a Trump win would be a deeply negative event for equities. After all, stocks dislike uncertainty, and a Trump victory would leave much in the air about economically important issues such as trade policy and monetary policy,” according to CNBC.
The World Gold Council expects jewelry demand to increase in the second half of the year, notably in areas like India where key festivals and fourth-quarter holiday season in the West, could provide further support.
For more information on gold, visit our gold category.
SPDR Gold Shares (NYSEArca: GLD)
Tom Lydon’s clients own shares of GLD.