The precious metal traded in a loose range of $59 between Monday and Thursday, hitting a low of $1,672 an ounce on Monday in the run up to the election on Tuesday and a high of $1,731 an ounce following President Obama’s victory over Republican challenger Mitt Romney.
Gold had an awful start to the week, with bullion plunging to a nine-week low of $1,672.24 as traders decided to wait out the results of the election. By the end of Monday’s trading session, however, gold had recovered a few dollars, and on Tuesday the yellow metal rose above $1,690.
Wednesday was a different story, with investors waking up to the results of the election showing Obama back in the White House with a firm majority of 303 electoral votes to Romney’s 206. Pundits had earlier said the race was too close to call.
The news caused gold to bounce to a fresh two-week high of $1,729 an ounce, its strongest showing since October 23, on expectations of continued loose monetary policy.
Low interest rates and government spending, such as the latest round of quantitative easing announced5 in September, are considered bullish for gold and other precious metals, which act as an inflation hedge amid current depreciation.
But the bounce was short-lived, with gold quickly losing momentum as the US dollar gained. Spot gold was last quoted at $1,713.10, down 0.1 percent on the day. Gold futures were also down, with the December gold contract off 60 cents at $1,714.40.
With the outcome of the election now decided, attention has turned this week to how President-elect Obama will handle the fiscal crisis that continues to grip the United States. That is proving bullish for gold. Congress, which has the power of the purse in the US, is split between Republicans and Democrats, meaning there are likely to be messy negotiations to avert the “fiscal cliff” — the nearly $600 billion worth of tax increases and spending cuts that could push the economy back into recession when they take effect in January.
On Thursday, investors were once again lured into gold’s safe haven status over concerns about the fiscal cliff alongside renewed worries over Europe. The euro was driven to a two-month low against the US dollar amid bad news from euro-laggards Spain and Greece. Fresh austerity measures passed by Greek parliament led to more violent protests while in Spain, there is speculation that the country will not ask to be bailed out by its EU partners.
Spot gold was last quoted at $1,726.25, up $8.40, while the December gold contract was up $11.50 at $1,725 an ounce.
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