Hillary versus Trump
A major safe-haven boost helped gold after the FBI announced on October 29 that it would revisit the probe against the handling of emails by the now-defeated Democratic candidate, Hillary Clinton. This probe had helped Donald Trump, the Republican candidate—and now the president-elect—narrow a polling gap with Clinton, thereby spooking the markets.
Most of the market participants believed that a Trump win would bring in more uncertainty regarding economic and global policies, leading investors toward less risky assets such as gold.
FBI cleared Clinton
On November 6, 2016, the FBI cleared Clinton of criminal charges related to the handling of classified information on her private server.
The FBI director, James Comey, said, “Based on our review, we have not changed our conclusions that we expressed in July.” This announcement seemed to boost Clinton’s chances in the US presidential race.
Because Clinton was viewed as a more status quo candidate, the news was met by bullish sentiment globally. Japan’s Nikkei jumped 1.6%, Korea’s Kospi ended 0.8% higher, and the Australian Stock Exchange gained 1.4%. The US dollar (UUP) also rose 1.2% against the Japanese yen after this announcement.
Risk assets gain
This announcement also boosted the demand for risk assets. While Brent crude futures saw an up day on November 7, gold’s safe-haven appeal took a hit and lost 1.5%. As we discussed in our pre-election gold series to gauge market sentiment regarding the US elections, the Mexican peso also rose ~2% to 18.60 against the US dollar.
During his campaign, Trump made his intentions clear that if he were to be elected president, he would create trade barriers with Mexico. That is why the odds of a Trump win and the Mexican peso have been inversely related.
Miners such as Alamos Gold (AGI), Hecla Mining (HL), Iamgold (IAG), and First Majestic Silver (AG) have exhibited leverages to precious metal prices. These miners should see higher down moves compared to gold in the event of a further downside.