Gold Still Reacting to Election Results

Wednesday and Thursday, day one and day two after the election, retail equity investors saw what they believed to be buying opportunities in equities that they could not pass up. Based on Trumps’ proposed platform, equity investors gobbled up companies that could pay dividends in the future under the new Trump
administration.

The CME exchange experienced all-time record volumes in the Gold futures contract on Wednesday, trading 800,000 contracts (for one day) after reaching a high of $1,338.30 in the December futures contract Tuesday evening during the election results. Then later on Wednesday, the gold trade was down to the $1,268 area as the equity market gained momentum. Thursday was no different as we seen the December gold contract trade 400,000 times, that’s a lot of action.

Last night Far East selling emerged, putting more pressure on the yellow metal and seeing the December contract trade down to the $1,250 area.

Some Wall Street institutional Gold Traders have reported taking on short positions starting Wednesday and will ride that bias until the equity markets settle down.

Financial advisors I spoke with this morning have indicated that they have seen strong selling in the Gold ETFs overnight. In turn they are cashing in their gold chips for some action in the equity markets.

A stronger dollar index and weaker oil prices haven’t helped the price of gold. Also putting pressure on gold this morning is the increasing odds of a rate hike in December as the CME Rate Watch tool now stands at a 81 percent chance that there will a rate increase at the December FED meeting.

I expect the strong sell off in the price of gold to settle down today, as equities are called to open slightly lower and the excitement in the equity market loses some steam.