Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

Austin— Gold fell 3.3% to close at a five-month low under $1,225 as the prospect of a Trump presidency and Republican Congress drove appetite for risk and the dollar. The metal lost 6.2% this week for its biggest weekly drop since June 2013.

The Dow rose to successive all-time highs after the election, largely at the expense of safe-haven assets like gold and bonds. According to Morningstar data, bond mutual funds and ETFs lost more than $18 billion.

If Trump's policies prove true to his campaign rhetoric, spending on infrastructure will expand dramatically, personal and corporate taxes will be slashed, and regulations in many sectors will be lifted. Traders viewed these prospects as bullish for stocks, especially in sectors like banking, healthcare, and energy.

The dollar had its best week in a year against major rivals, adding another 0.2% today as traders speculate that Trump's policies may accelerate the pace of rate hikes from the Fed. The combination of much greater spending and much lower tax revenues would balloon the deficit, while Trump's promise to rewrite trade deals is likely to result in higher tariffs. Both scenarios could generate much higher inflation and therefore higher interest rates, according to Deutsche Bank.

In the short term, a stronger dollar may weigh on gold and other commodities denominated in it for international trade. But significantly higher inflation should be bullish for the metal in the longer term as a hedge against loss of buying power.

Further pressuring gold, oil prices plunged 3% after OPEC said production reached a record in October, raising questions about the cartel's interest in curtailing output to support prices. Gold often trades in sympathy with oil as a hedge against energy-inflation.

Demand for physical gold jumped this week in Asia as investors took advantage of lower prices. Premiums for bullion rose strongly in China and hit a 21-month high in India, the two biggest gold-consuming nations.

The other precious metals were lower for the day and mixed for the week. Silver plummeted 7.2% to tally a weekly loss of 5.4%. Platinum surrendered 3.9% today and 6.1% this week. Palladium, more directly tied to industry, slid 1.7% today but gained a whopping 9.6% this week.

At the Comex close: December gold fell $42.10 to $1,224.30; December silver lost $1.36 to $17.38; January platinum dropped $39 to $943.20; and December palladium shed $11.80 to $684.70 an ounce.