Gold Snaps Biggest 3-Day Drop in a Year as Trump Fallout Eases

Updated on
  • Hedge funds were caught out by gold’s post-election move
  • Silver, platinum and palladium also rose in the spot market

Gold snapped its biggest three-day drop in more than a year amid signs that prices fell too far, too fast and as the dollar weakened.

Bullion’s 4.4 percent slump in the previous three days pushed its 14-day relative-strength index below 30, signaling to some traders and analysts that prices were oversold. The metal also rose on Tuesday as the dollar fell for the first time since last week’s U.S. presidential election, Treasury yields dropped from this year’s high and base metals slipped.

After initially jumping on haven demand following Donald Trump’s surprise election win, gold then plunged as the president-elect’s pledge to cut taxes and boost infrastructure spending sent the dollar and industrial metals higher. Because those plans may lead to faster growth, traders are almost certain that the Federal Reserve will raise U.S. interest rates next month, curbing the appeal of owning gold, which doesn’t provide any yield.

“Things are a little bit quieter, but the market’s still very jumpy and nervous,” David Govett, head of precious metals trading at Marex Spectron Group Ltd. in London, said by e-mail. “I think we have seen enough on the downside for the time being unless the dollar rallies massively.”

Bullion for immediate delivery rose 0.1 percent to $1,223.08 an ounce at 1:54 p.m. in New York, according to Bloomberg generic pricing. It reached the lowest since June on Monday. Gold futures for December delivery gained 0.2 percent to settle at $1,224.50.

Trump’s victory defied most poll-based forecasts for gold to climb and hedge funds were among those caught on the wrong end of the election result. Fund managers increased their net-long position in gold by 2.2 percent in the week ended Nov. 8, just before prices dropped, U.S. government data show.

Holdings in gold-backed exchange-traded funds fell 4.88 metric tons to 1,966.3 tons as of Monday, capping the biggest three-day drop in more than three years, data compiled by Bloomberg show.

In other precious metals news:

  • Billionaire hedge-fund manager John Paulson maintained his holding in the world’s biggest gold ETF in the third quarter, while George Soros sold his stake.
  • Silver, platinum and palladium also rose in the spot market.
  • Kinross Gold Corp., AngloGold Ashanti Ltd. and Agnico Eagle Mines Ltd. were among the best performers among major gold producers. An index of bullion miners tracked by Bloomberg Intelligence jumped as much as 2.6 percent, ending a three-day run of losses.

— With assistance by Luzi-Ann Javier

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