Precious metals and related exchange traded funds have suffered on rising Federal Reserve interest rate expectations and a strengthening U.S. dollar, but may have moved past the worst of the sell-off.
“Historically expectations of a rate hike drive support for the U.S. dollar which is generally negative for precious metals,” Maxwell Gold, Director of Investment Strategy at ETF Securities, said in a research note. “Once a rate hike has occurred, however, this trend typically reverses. A similar path may play out this December, with precious metals – in particular gold – finding support from continued negative real interest rates, episodic market volatility and continued political uncertainty leading up to and following the US presidential election.”
Currently, the markets are baking in a Democrat Hillary Clinton victory for the presidential election. However, if Republican Donald Trump pulls off an upset victory, gold could strengthen up to 10% when a new party enters the White House, Gold told ETF Trends in a call.
Any further uncertainty would also help drive safe-haven demand for gold and precious metals.[related_stories]