“Not only was I surprised by the Trump victory, I believe now even more than ever, the physical gold market will not be viewed as a safe haven any longer, but will become an investment vehicle to offset negative interest rate issues around the globe."
A wild election night of trading in all markets. As the results started coming in showing the possibility that Trump will be the next president, the Equity markets headed south and at one point were down over 800 points and gold was up over 60 dollars on the news.
One market that really took a hit was the Mexican Peso. At one point last evening the Peso was down vs. the U.S. dollar over 13 percent.
Base metals overnight started lower but quickly recovered with nickel and copper up over 6 percent at new 2016 highs.
As I indicated in last week’s comments, gold traders on the street were tired of seeing a market trade sideways with no volatility and were hoping for some action. And action they received.
There was tremendous activity in the December gold contract overnight. so much so, that at the time of this report the CME volume is over 600,000 contracts for the day, heading to (and will probably break) the all-time high record volume for one day on the CME Gold contract, set back in April 2013, at over 751,000 contracts changing hands. A remarkable amount of trading activity.
Even the CME Copper futures contract overnight showed record volumes as the talk of rebuilding the U.S. infrastructure news boosted the price.
Some dealers I spoke to early this morning in Europe have said that physical demand for both gold and silver has picked up over the last few days and they anticipate that continuing over the days to come. One dealer said, “not only was I surprised by the Trump victory, I believe now even more than ever, the physical gold market will not be viewed as a safe haven any longer, but will become an investment vehicle to offset negative interest rate issues around the globe. Who knows how the new U.S. administration will conduct global business.”
CME Watch tool this morning is calling for 66 percent chance of a rate hike in December. Since the first of the year I’ve been indicating that a rate hike will not occur in 2016 and I still stand on that prediction even with the high odds of a rate hike in December. The economic data at this point still does not justify a rate hike. In my opinion, if a rate hike doesn’t happen in December, gold should have a strong move to the upside.
I just loosened my seat belt as the Dow Industrial average opened unchanged and Gold traded below the $1,300 dollar level. Should be an interesting day.
Author Name: Walter Pehowich
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