HSBC: Gold Would Rise Faster With Trump Than ClintonBy Kitco News
Tuesday November 01, 2016 11:44
(Kitco News) - Gold prices will rise under either a Donald Trump or Hillary Clinton presidency but likely would rise faster under Trump, perhaps hitting $1,500 an ounce before the end of the year, said HSBC Tuesday.
The bank issued a special report on how the precious metal might be expected to act under various U.S. election scenarios. Voters go to the poll on Tuesday to decide who will be the next president, as well as vote in congressional races.
“This U.S. election may be particularly important in setting the course of US economic policy and foreign policy and hence for gold prices, given the severity of the challenges facing the economy (including still-sluggish economic growth, income inequality, high debt levels and low productivity) and foreign-policy entanglements and challenges,” said the report. “Policy proposals from Democratic presidential candidate Hillary Clinton and Republican Donald Trump vary significantly, leading to potentially very different implications for gold and other assets.”
A win by Trump would boost gold based on his calls for more aggressive protectionist policies regarding international trade, HSBC said. The bank suggested Clinton has also moved toward more protectionism, but not to the extent of Trump.
A win by Clinton “suggests economic continuity” and would reinforce HSBC’s current outlook for gold based on expectations for low interest rates and recovering physical demand, HSBC said. The bank’s outlook is for gold hit to $1,400 by year-end and $1,440 by the end of 2017, with a 2017 full-year average of $1,310.
“If Mrs. Clinton wins, we believe her trade policies in particular and shift to protectionism would reaffirm our already bullish outlook,” HSBC said. “If contrary to current poll indications, the Democrats also take control of Congress, then there could be a more expansionary fiscal policy. This could have a more bullish impact on our 2017 forecasts.”
Meanwhile, based on Trump’s more aggressive calls for protectionism, gold could benefit from weaker global trade, as well as counter measures from other nations and potential competitive currency devaluations, HSBC said. Further, Trump’s calls for tax cuts coupled with spending increases for the military and infrastructure would exacerbate the federal deficit, whereas Clinton has called for higher taxes to cover her spending increases, the bank said.
“A Trump win would be decidedly gold-bullish, in our view, given the potential for increased protectionism, higher budget spending and geopolitical risks. Gold prices could jump to $1,500/oz relatively quickly, and end the year at that level on a Trump win,” HSBC said
With a Trump presidency, HSBC sees gold ending 2017 at $1,575 an ounce, with a full-year average of $1,410.
“A Democratic win in both houses along with retention of the presidency may make a Clinton administration more bullish for gold than would otherwise be the case,” HSBC said. “Divided government, that is to say a Democratic presidential win but Republican retention of the House of Representatives and/or the Senate, may add to political gridlock and probably leave gold prices unfazed.”