(Bloomberg) — Donald Trump’s victory immediately shifted markets from stocks to Bitcoin. It will take much longer for gold to turn things around.
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According to Deutsche Bank, the metal’s performance in the two days immediately following the Republican candidate’s victory was the worst in at least 13 US presidential elections. Gold prices have fallen nearly 7% since Election Day, even as several other asset classes enjoy a post-campaign boost.
“When people get really interested in gold, nothing else will work,” said Rob Haworth, senior investment strategy director at US Bank. “Shares are doing well; you’ll even see solid returns for low-quality corporate loans. So you are less likely to look for alternative sources of portfolio growth.”
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Gold’s decline is a marked reversal for a commodity that had risen more than 30% in the year leading up to the US vote, hitting record after record as geopolitical and economic risks attracted investors. While longer-term uncertainty remains, with Trump known for his sometimes wildcard positions, much of gold’s safe-haven appeal came after gold’s most bullish scenario – a contested election – failed to materialize.
A rising dollar in the days since Trump’s re-election is also negative for the precious metal as it is priced in US currency. At the same time, the US economy appears to be in reasonably good shape, as inflation is declining and the Federal Reserve is in no hurry to cut interest rates further.
With the rest of the U.S. economy looking so strong right now, “gold would be a contrarian call,” said Matt Miskin, co-chief investment strategist at John Hancock Investment Management. “The sentiment at the moment is that there is very little risk, whether fundamental or geopolitical. In these types of environments it’s not easy to go against the momentum.”
Some investors may not personally agree with the president-elect’s platform, but just knowing what to expect during Trump 2.0 has helped alleviate some of the recent uncertainty that has helped push the precious metal to new highs pushed. The confirmation of a Republican clean sweep also means there will be more leeway to implement the policies he telegraphed during his campaign. Trump’s agenda, ranging from tax cuts to financial deregulation and tariffs, is causing hedge funds to pile into sectors that could benefit, including big banks and domestic industrial companies.
