Democratic Party presidential candidate Hillary Clinton proved herself better than rival Donald Trump on Monday’s highly-anticipated US presidential debate—bringing the dollar up, and gold futures lower.
Pre-debate hours had gold up by 0.18%. On Tuesday, however, December delivery on the Comex division of the New York Mercantile Exchange, futures of the yellow metal had fallen 0.61% to $1,336.15 a troy ounce, or $7.60.
The dollar had initially risen higher with Clinton’s victory, recovering the loss coming from the Federal Reserve’s policy decision last Wednesday. It is currently at 95.38, up by 0.19%.
Clinton Wins Round One
While a Trump presidency and a debate victory last night could have a so-called protectionist dollar boost, the greenback was still buoyed by Clinton’s win. Market sentiment seemingly improved on the Democratic nominee’s victory in the first of three debates against the Republican’s.
Online betting companies shortened the prospects on a Clinton victory in the wake of Monday evening debate, making her as the favorite among the described companies.
It is only a matter of six weeks before the November 8 US presidential election, and the market has set its focus on American politics—which is why the tightening race between Clinton and Trump is becoming more and more essential on the movement of the dollar. Recent polls have revealed that Clinton’s previous lead is no longer as comfortable as it once have been. Trump support is clearly narrowing the race sharply.
Traders are mostly expecting Clinton to win the presidency, and investors are extremely concerned of a Trump regime for the latter’s populist, unexpected style.
The next presidential debate is set on October 9, and the last round is scheduled on October 19.
Gold has been in the green for the past days after the Fed held off on hiking rates and slashed the number of rate increases it forecasts in 2017. The US central bank has policy meetings set in early November and mid-December and economists are deeming that Fed officials would evade a hike in November due to the meeting falling just days ahead of the US presidential election.
Investors will be looking ahead to comments for further hints on the timing of the next rate hike from Fed Vice Chair Stanley Fischer, due to speak at 15:15GMT at the Howard University Economic Convocation, in Washington DC.
Besides Fischer's speech, traders will focus on U.S. consumer confidence data for September, S&P/Case-Shiller home price data and a preliminary report on service sector activity afterwards. All events will have an impact on the currency, and thus on metals.
Gold, currently priced at $1,336.15 a troy ounce, will likely fall off the six-day rally due to the fundamentals surrounding it. On a daily view of the chart, the candle has dipped through the support level of 1,333.23.
Indicated on the chart as well are the rally streaks of the metal—mostly by Brexit fears, US data, and Fed dovish views on rate hikes, and recently, the absence of rate hikes in September and one less rate hike forecast from the central bank. July 06 marked a 28-month high for the yellow metal as Brexit fears ensued, thus pushing demand for safe-haven assets such as the bullion.
Still, despite the bearish candle today, the dollar’s gains may not last and therefore a bullish trend remains strong for gold. From an investment point of view, the volatility in the capital markets is expected to increase sharply as the political uncertainty surrounding the US election intensifies; it would appear that neither Clinton nor Trump will be able to launch a commanding lead in the current tight race to the White House and therefore the outcome will be challenging to handicap.
The presidential election is, as said earlier, becoming quite the market driver now that is nearing and investors are worrying on a possible Trump presidency. The post-debate analysis hardly ended and risk aversion returned to the markets as USD/JPY surrendered most of its gains, trading at 100.35 vs. 100.98 a few hours earlier. The pair remains under heavy selling pressure as US yields continue to withdraw from the near-term peaks and the shorts still watch the 100.00 barrier as prime stop hunting territory.
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