Gold lost its ground on Tuesday, as both the greenback and equity markets firmed, following the first Presidential debate and stronger-than-expected economic reports. Markets viewed that Democratic candidate Hillary Clinton outshone rival Donald Trump, thus denting the safe-haven appeal of bullion and bonds. Gold snapped its six-day winning streak with spot gold down 0.7% to $1,326.91 an ounce.
Meanwhile, the U.S. consumers’ confidence unexpectedly jumped in September, to attain its highest level since the recession. The index increased to 104.1 this month from 101.8 in August, much higher than analysts’ expectation of a reading of 99. The survey is a closely followed barometer of consumer attitudes, measures confidence toward business conditions, short-term outlook, personal finances and jobs.
This upbeat number signals that American households could continue to support economic growth in the U.S. Household spending accounts for the majority of U.S. economic activity. Healthy growth in consumer outlays supported the economy’s growth at a modest pace in second-quarter 2016, despite headwinds such as reduced business investments and lower government expenditures.
Markets Jump while Safe-Haven Metals Dip
Stocks are benefitting on the prospect of a Clinton presidency as investors are unsure of what a Trump presidency might mean for U.S. foreign policy, trade and the domestic economy. As of Tuesday close, the Dow Jones Industrial Average gained 133.47 points (0.74%) to close at 18,228.30 and the S&P 500 went up 13.83 points (0.64%) to 2,159.93. The tech-laden Nasdaq Composite Index closed at 5,305.71, gaining 0.92%. The dollar index, which weighs the greenback against a basket of currencies, was up 0.19% at 95.35.
It is a well known fact that there is an inverse relationship between the U.S. dollar and the price of gold. Gold prices for December delivery on the Comex division of the New York Mercantile Exchange closed 1% lower at $1,330.40 a troy ounce yesterday. Among other precious metals, silver fell 2.2% to $19.165 an ounce.
Gold Still Has Shine
The dip notwithstanding, prices of the yellow metal are up roughly 23% year to date. Gold has been enjoying a solid run in 2016 after three lackluster years. The Brexit-induced chaos in the global markets has spurred investors’ demand for gold. The deferral of U.S. interest rate hikes has been another major factor that has helped gold regain its shine this year.
A low-rate environment augurs well for the yellow metal. Concerns about global economic growth, along with lingering economic and political uncertainties, are likely to act in favor of gold in the near to medium term. Further, gold prices are generally helped by retail demand in countries like India and China, with the wedding and festival seasons occurring in the second half of the year.
MINING-GOLD Industry Price Index