Gold is down $15 or 1% in early Asian trading as the FBI said it stood by its earlier finding that no criminal charges were warranted against Democrat Hillary Clinton just two days ahead of the U.S. election. Silver is also down over 1% as the dollar has bounced on the news.
U.S. equity futures are higher in early trading, with the S&P mini Futures up 1.3%. Investors view the increased odds of a Clinton victory as bullish for stocks. The uncertainty of a Trump presidency had riled markets over the past week. Better the devil you know?
Gold and silver may also come under pressure in the coming weeks as we near the December 14 FED meeting. The odds of a FED rate hike are currently over 80%. While this move is largely priced into the markets, it could still boost the dollar and put downward pressure on stocks and precious metals as a result.
Of course, the FBI clearing Clinton does not necessarily knock Trump out of the race. A good amount of damage has already been done and early voting could have an impact on the results. With the possibility of Trump challenging the results should he lose, a contended election could once again create chaos in the markets.
The bigger picture view has not changed for gold and silver. Both metals have bottomed and bounced sharply following a 4-year correction. Even with the recent pullback, both metals have remained above their respective 200-day moving averages and the bull cycle remains intact. They should also get a bounce as we enter the strongest seasonal period for precious metals. Thus, we view any dips between now and year end as a buying opportunity for long-term investors.
The sell-off in equities may be overdone in the short-term, so we are looking for a bounce in the days ahead. The market has been over-emphasizing the impact of a 25 basis point rate hike and probably assigning too high of odds to a Trump victory. Interest rates will remain near historic lows and central bank policy will continue to be highly accommodative.
The Fear & Greed Index has flipped from extreme greed just a few months ago to extreme fear today. The reading of 14 is the lowest it has been in quite some time. Should the markets stabilize following the election and December FOMC meeting, this index should move back towards the green.
The markets are likely overshooting, as they usually do and creating opportunities for astute investors. Others believe that the stock market has been artificially supported for some time and is due to correct severely following the election, no matter who wins.
Our model portfolio is up 80% year to date and we believe the next major uptrend for gold investors will be underway shortly. Supply/demand fundamentals remain supportive of precious metals and a wide range of factors from price discovery shifting East to widening deficits should continue to push prices higher.
In addition to gold/silver positions, we also believe the current dip is offering a buying opportunity across various other sectors. Many of the dividend stocks that we track are offering attractive entry points, as well as a few quality miners in the lithium and graphite sectors.
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