Why Didn't Gold React Better to Trump's Win?
Our assumption – along with many others – was that gold would soar on a Trump victory. At first, gold exceeded $1,350 overnight, while the Dow index lost 800 points, but those markets reversed the next day and have gone in opposite directions ever since – with gold down to $1,222 and the Dow at record highs.
The main reason why gold went down is that Republican control of both houses of Congress and most governorships and state legislatures could result in serious political reform. The market assumed, based on that fact, that the economy could get humming again, which is ironically considered to be bad for gold.
In addition, some leading gold ETF investors bailed out of their position, sending gold down temporarily. The momentum trading herd seemed to switch from gold to stocks. For instance, Stanley Druckenmiller, the founder of Duquesne Capital, said he sold all his gold on election night. He told CNBC that he’s optimistic that Trump will bring deregulation and “serious” tax reform, which will stimulate the economy.
Then on Friday, gold fell further, from $1,260 to $1,230, after over 85,000 gold futures contracts, worth over $10 billion, traded on the market opening, according to Zero Hedge market blogger Tyler Durden. The seller has not been disclosed, but this looks like another knee-jerk trade out of gold and into stocks.