By Biman Mukherji
Gold prices zoomed above $1,300 per troy ounce during Asia trading hours Thursday as new opinion polls showed Republican Donald Trump closing the gap with Democrat Hillary Clinton in the U.S. presidential election.
The possibility of a Trump win next week has fanned gold demand since Monday, overriding bearish sentiment sparked by the expectation that the U.S. Federal Reserve will raise its key benchmark rate in December.
A Clinton win would be positive for risky assets such as equities, while a Trump victory would boost safe-haven assets such as gold by increasing uncertainty about policies, some analysts say.
"The reforms that Donald Trump proposes on trade, immigration and fiscal spending are unconventional and imply large changes, while there are concerns that geopolitical risk would rise," an ABN Amro report said. "This is adding to the uncertainty now that the election result remains too close to call."
After reaching above $1,300 per troy ounce in the Asia morning, gold was trading $4.60 higher, at $1,301.60 per troy ounce, in the afternoon.
"I think the rate hike is pretty much priced into the gold market now. What we are seeing is safe-haven buying," said Daniel Hynes, commodity analyst for ANZ Bank.
"If Trump is successful, we could see gold rally in the immediate aftermath of election," he said. "Even if he does not [win], gold prices should hold up well." Mr. Hynes added that quantitative easing in Europe and elsewhere would provide a layer of support to gold.
The most recent polls available show Mr. Trump gaining on Mrs. Clinton, according to RealClear Politics' roundup of polls. The most recent, from the University of Denver on Thursday, showed the two in a dead heat, with 39 percentage points each. The latest ABC News/Washington Post tracking poll, released Wednesday, showed each candidate with 46 percent.
Robust physical demand in India and China--which account for about half of world demand--is also supporting gold prices.
The metal had fallen below the $1,300 level in early October amid increasing expectations that the Federal Reserve would raise interest rates before the end of the year. That expectation had strengthened the U.S. dollar and pushed down gold prices. The two asset classes typically have an inverse relation.
On Wednesday, the U.S. Federal Reserve left interest rates unchanged, as expected, while hinting that it expects to raise them in December. Investors will also be watching the U.S. jobs data on Friday for indications about the country's economy.
The tide began turning in favor of gold this week as polls signaled the presidential race was tightening after the director of the Federal Bureau of Investigation said the law enforcement agency was reviewing new emails discovered connected to Mrs. Clinton's private server in an unrelated case.
Write to Biman Mukherji at firstname.lastname@example.org
(END) Dow Jones Newswires
November 03, 2016 04:47 ET (08:47 GMT)
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