Big News
The big news this week is that Donald Trump was elected to be the next president of the United States. Whether due to his comments about restructuring the government debt, tariffs on imported goods, or other economic concerns, many expected news of his election to push up the price of gold. They were wrong.
Every day since last Friday (November 4) has seen the price of gold falling. From a peak of over $1308, the price fell to $1227 on Friday.
There was a rally from $1269 to $1337 on the evening of election day, from 8pm to midnight in New York. This is roughly the time when election results began to trickle in and show that Trump was going to win. At the same time, the stock market tanked. S&P futures fell from 2150 to 2028, or -5.7%. Volume was off-the-charts high for US evening time.
But then what passes for normal took hold once again. The price of gold resumed its slide. The stock market recovered.
One thing is for sure. The price of gold does not go up for the reasons supposed by most gold bugs. Any more than it goes down for the reasons given by the propaganda of the paper bugs.
There is something else going on that could drive the gold price up. I refer to the new Indian policy of demonetizing larger-denomination cash (500- and 1000-rupee notes, worth $7.40 and $14.80 – i.e. not so large). So many Indians rushed out to buy gold that credible sources report a temporary 20% spike in the rupee-price of gold.
We doubt that Prime Minister Modi can force many Indian cash holders to increase their bank balances. However, he could push the marginal cash holder to increase his holdings of gold. If that proves to be durable, that could drive the price of gold up substantially. This situation with cash and gold in India needs to be watched.
The price of silver took a big dive on Friday, ending down a buck twenty. Yes a buck twenty, as in -6.4% (the low of the day was 15 cents lower).
This post was published at Acting-Man on November 14, 2016.
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