Gold Down Over 1% After French Vote
Gold prices dropped in early Asian trade on Monday after French exit polls showed centrist Emmanuel Macron and far-right leader Marine Le Pen leading the official vote count in the first round of French election.
Spot gold, on Kitco.com, was trading 1.27% lower at $1,267.20 at the time of publication.
The fall in gold prices was due to thin Asian trade, Kitco’s global trading director Peter Hug explained.
“Gold dropped $20 on the news, likely because of thin Asian trade, but the $1,268 level needs to hold to prevent further liquidation, when Europe re-opens.” Hug said. "The key driver for gold will be the dollar and equity market reactions. It is expected that this result will be positive for US equities at the open."
“The first round elections in France went according to script with centrist Emmanuel Macron and far-right candidate Marine Le Pen moving forward to the run-off election in two weeks. Traders had been long gold in the event that both Le Pen and communist candidate Jean-Luc Melenchon might be the victors,” he added.
With 83% of the votes counted, Macron was winning the first round with 23.32% of the votes and Le Pen was coming in second with 22.55%, according to France’s Interior Ministry. Macron and Le Pen will face each other in the second round on May 7.
Investors should keep an eye on the ECB and the euro as markets continue to digest election results, noted Hug.
“The French results may make it easier for ECB President Mario Draghi to reign in monetary easing next week, but it is likely Draghi will await the final outcome in two weeks. A victory for Le Pen would be devastating to the euro, but it is widely expected that Macron will be France’s next president,” he said.
Macron looks to beat Le Pen by 62%-38% in the second round of voting, according to the latest lightning Ipsos poll.
"We expect Macron to win the second round and to become the next French president, on the basis that the candidate closest to the center of the political spectrum has the best chance to win," Citi said in a note. "Given Macron's pro-EU platform, the outlook for Europe ought to be strengthened."
In terms of a long-term view, gold prices have been rallying this year, with analysts noting that so far gold has been driven in part by increased demand in Europe as investors seek safe-haven assets due to the rise in popularity of euro-skeptic parties like Marine Le Pen’s Front National.