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Gold Futures Fall as Trump Victory Shock Subsides

November 10, 2016 at 18:36 by Andrew Moran

Gold futures tumbled on Thursday as the shock of Donald Trump‘s upset victory has subsided. Despite claims of doom and gloom by the financial experts, the markets are booming, and this is impacting the yellow metal, which had surged on the previous trading day.

December gold futures slipped $6.20, or 0.49%, to $1,267.30 per ounce at 17:12 GMT on Thursday. This comes one day after gold soared as high as 5% before settling down 0.1%.

Silver has been able to maintain its rally. December silver futures climbed $0.36, or 2.00%, to $18.74 an ounce. Silver also started off Wednesday’s trading session jumping as high as 1.20% before ending the day just a little more than 1% higher.

Traders are ostensibly still weighing the effects of president-elect Trump’s economic policies. The billionaire real estate mogul has called for new infrastructure spending and additional tax cuts that will likely lift the US budget deficit. When you add in so-called protectionist trade policies, traders feel this could hit the greenback and raise inflation levels.

In any event, these are all good news for gold and silver in the long run.

Meanwhile, in the short-term, gold could dip further ahead of the Federal Reserve‘s intentions to raise interest rates at next month’s Federal Open Market Committee (FOMC) meeting. Some investors had questioned if the US central bank would proceed with a December rate hike. The market overall still believes the Fed will move ahead with its first rate hike since December 2015.

According to the CME Group FedWatch tool, there is a 76% chance of a December rate hike.

Gold is sensitive to a rising-rate environment because it lifts the opportunity cost and sends investors fleeing to yield-bearing investments. A stronger dollar also negatively affects the yellow metal because it makes commodities more expensive to buy for foreign investors.

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