Gold Slumps Amid Speculation of Improving U.S. Economic Outlook

  • ‘People are suddenly very bullish on the economy’: BMO’s Wong
  • Comex futures had heaviest trading day ever on Wednesday

After a volatile day of record trading, gold futures fell again as the dollar rose amid increasing speculation the U.S. economy will improve under a Donald Trump presidency.

Futures dropped as much as 1.2 percent on Thursday as markets reacted to Trump’s surprise victory in the U.S. election. The Bloomberg Dollar Spot Index, which tracks the greenback against a basket of 10 currencies, advanced 0.7 percent, on pace for the biggest two-day gain since June. Gold also fell as investors piled into equities, with the Dow Jones Industrial Average rising to an all-time high.

Gold futures rose 25 percent in the first half amid worries of a slowdown in global economic growth, tempering investors’ expectations for multiple rate hikes by the Federal Reserve in 2016. On election night, just as gold was heading for its biggest intraday jump in four months, billionaire investor Stan Druckenmiller sold all his gold.

“People are suddenly very bullish on the economy,” Tai Wong, director of commodity products trading at BMO Capital Markets in New York, said by phone. “Look at stocks, the possibility of higher rates and the stronger dollar, which combined is having a negative effect on gold. Also, Stan Druckenmiller came out this morning and said he sold his very substantial gold position on election night.”

Gold futures for December delivery fell 0.6 percent to settle at $1,266.40 an ounce at 1:49 p.m. on the Comex in New York after touching $1,258, the lowest intraday since Oct. 18.

Volume on the Comex in New York was 117 percent above the 100-day average for the time of day. On Wednesday, a record 869,000 contracts changed hands, according to data compiled by Bloomberg.

The market-implied chance of a December rate hike by the Fed is 82 percent, compared with 68 percent at the beginning of the month, according to data compiled by Bloomberg.

In other metal news:

  • Holdings in exchange-traded products backed by gold rose for a third day to 2,056.8 metric tons on Wednesday, the highest since Oct. 20.
  • Silver advanced for a third day amid speculation Trump will boost U.S. infrastructure spending. Futures for December delivery rose 2 percent to $18.737 an ounce on the Comex.
  • On the New York Mercantile Exchange, platinum slumped, while palladium gained.
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