Jeff Christian On Gold In A Trump WorldBy Kitco News
Wednesday November 09, 2016 12:16
(Kitco News) - With gold prices coming off election highs Wednesday, one longtime industry expert says he still expects prices to move higher, although at a moderate pace.
Jeffrey Christian, managing director at CPM Group
Speaking during Reuters' Global Gold Forum webinar, CPM Group’s Jeffrey Christian said he is not surprised that gold did not sustain its overnight gains.
“Our view has been, and continues to be, that the gold price may back off now that the election is behind us,” he said during the webinar Wednesday morning.
Gold futures managed to rally to nearly two-month highs on the back of an equity selloff as election results started to roll in, calling for a Donald Trump presidency. Now that investors have digested the election results, gold prices have come off their highs with December Comex futures last trading up just 0.73% at $1,283.80 an ounce.
Based on CPM’s forecasts, gold prices are expected to trade below $1,380 an ounce for the rest of the year and to average around $1,266. However, gold prices are projected to rise in 2017, averaging around $1,325 an ounce.
“The price likely will rise, but it will rise in a moderate pace as investors assess a range of issues,” he said. “It's not just what Trump means to the world, but also, among other things, what the Fed does in December. So, we are not concerned that gold is rising in a measured approach.”
As focus now shifts towards the Federal Reserve’s next policy meeting in December where the central bank is expected to announce a rate increase, investors question whether the election results would be enough to defer tightening.
“We have been saying it might not, because raising interest rates at this time would be a bad idea regardless of the election results,” he explained. “We assume calmer heads will prevail, and expectations of a December increase will remain in place. This could take gold down, a bit. We don't see [gold] falling sharply, but we don't necessarily expect a sharp increase over the rest of the year.”
As for gold’s safe-haven appeal under a Trump presidency, Christian said there is definitely a “Trump premium” in place.
“There will be reduced cooperation with the U.S. by the world, and reduced cooperation with the world by the U.S. government. There will definitely be a premium placed on gold due to this. It may be around $40, but his actions could lead to jumps upward in prices at times,” he explained.
At the same time, Christian said the Trump win could likely help boost physical gold demand as well.
“CPM has been involved with groups seeking to broaden the appeal of owning physical gold and silver beyond the 1% of U.S. households that currently own gold. Trump will do more for this push that we probably could hope to achieve,” he said.