Gold has suffered brutal, withering selling pressure in the month following the US presidential election. The stock markets’ surprise surge after Trump’s surprise win has led speculators and investors alike to rush for the gold exits. As usual the former group’s extreme selling came largely through gold futures. But this gold-futures dumping has been so severe that it is rapidly exhausting itself, a bullish omen for gold.
Gold’s stunning post-election selloff resulted from a united mass exodus by gold’s two dominant groups of traders. Speculators ferociously dumped gold futures with an intensity rarely witnessed, while stock investors jettisoned shares in the leading GLD gold ETF far faster than gold itself was falling. With so much gold being spewed into the markets so rapidly, this metal didn’t have a chance of staying on its feet.
Gold futures had actually skyrocketed on election night, up 4.8% to $1337 as Trump’s perceived odds of winning started to soar. But once the plummeting stock markets rebounded violently, the gold selling began. And it soon intensified after the election. Not only did stock markets shockingly surge to new all-time record highs, but the US Dollar Index blasted up to a major new 13.7-year secular high of its own.
Gold has always been a contrarian anti-stock trade. As a rare asset that moves counter to stocks, gold’s critical investment demand is heavily dependent on stock-market fortunes. Investors alternatively flock to gold to diversify their stock-heavy portfolios when stock markets fall, and then abandon it as stocks soar again. The exceedingly-strong post-election stock markets swiftly slayed gold investment demand.
This post was published at ZEAL LLC on December 9, 2016.
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