Buy Gold No Matter Who Wins the Election, HSBC Says
Here is the opening of this topical article from Bloomberg:
There's one certain winner of next week's presidential election, according to HSBC Holdings Plc: investors in gold.
Although they deem a Donald Trump victory more supportive for the price of the metal than a win by Hillary Clinton, the bank's Chief Precious Metals Analyst James Steel says it'll enjoy at least a 8 percent jump whoever wins the race.
Both candidates have espoused trade policies that could stimulate demand, with gold offering a potential "protection against protectionism," he says. Even the relatively more internationalist Democratic candidate has argued for the renegotiation of longstanding free-trade agreements. That's positive for gold — even if "not on the scale of Mr Trump’s agenda."
If the real-estate magnate triumphs, gold could rise to $1,500 an ounce, according to HSBC, up from around $1,289 at 10:55 a.m. in New York.
This is a bold forecast from James Steel who is a very experienced analyst. I think he is right and the only surprise for me is that it took so long for the crowd to become more interested in precious metals. But that is markets for you and gold, silver, platinum and palladium had plenty of competition from stock markets and especially government bonds.
Which will do best among these futures-traded precious metals? I think gold is the safest, meaning it has the least downside risk. However, if James Steel is right, silver should way out perform because it trades like a high-beta version of gold, outperforming in both directions.
All precious metals have significant industrial demand but the big cyclical moves to the upside occur when they are regarded as hard money in relatively scarce supply. Historically, platinum has usually traded at a premium to gold, favoured as understated jewellery and because it is scarce relative to the yellow metal, as is palladium. However, platinum slumped after reaching a high near $1200 in mid-August, on exaggerated stories that is would suffer from rapid growth in electrical cars. They said the same about silver when digital cameras were gaining in popularity but it rallied to nearly $50 in 2011.
Full disclosure: I have long positions in these four futures-trades precious metals.
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