Trump as Presumptive GOP Nominee and Gold

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Published : May 06th, 2016
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Category : Market Analysis

Both Ted Cruz and John Kasich dropped out of the presidential race this week. What does it mean for the gold market?

On Tuesday night, Ted Cruz suspended his campaign. The reason was Trump’s spectacular victory in Indiana. The billionaire took all 57 delegates. On Wednesday, John Kasich also decided to end his GOP presidential run. The truth is that he never had any chances to win. He just wanted to prevent Trump from winning 1,237 delegates before the Republican convention.

Therefore, the contest is over – Trump became the presumptive GOP nominee. The businessman is now forming his vice presidential selection committee. However, the Republican leaders have not yet decided whether to support Trump in the general election. Given the course of Democratic primaries, a general election matchup between Trump and Clinton is almost certain.

What about Trump’s victory and gold? Trump’s victory in the GOP primaries should be positive for the yellow metal, as his presumptive nomination increases uncertainty among investors who do not know what to expect of Trump. Thus, gold should gain as a safe-haven asset. Moreover, he proclaimed himself as a “low interest rate person”, who sees “major problems” with the strong greenback. Such declarations should raise uneasiness among investors. Some analysts have even recently noticed a correlation between gold futures prices and Trump’s primary results.

However, the shiny metal lost steam yesterday, despite good news for the controversial billionaire. It means that the price of gold is affected more by the Fed’s monetary policy, real interest rates and the U.S. dollar than by political events. Elections are in November, so there is still some time before them. And Hillary Clinton leads the polls by almost 10 percentage points.

Summing up, Trump became the presumptive GOP nominee. Theoretically, it should be generally positive for the gold market, but we did not see any strong upward move. Actually, the yellow metal lost steam after it reached $1,300 this week. It suggests that, just like with geopolitics, political events are not as strong drivers of gold prices as the U.S. dollar or real interest rates.

If you enjoyed the above analysis, we invite you to check out our other services. We focus on fundamental analysis in our monthly Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. If you’re not ready to subscribe yet and are not on our mailing list yet, we urge you to join our gold newsletter today. It’s free and if you don’t like it, you can easily unsubscribe.

Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.

Thank you.

Arkadiusz Sieron
Sunshine Profits‘ Gold News Monitor and Market Overview Editor

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Przemyslaw Radomski is the founder, owner and the main editor of www.SunshineProfits.com. Being passionately curious about the market’s behavior he uses his statistical and financial background to question the common views and profit on the misconceptions. “Don’t fight the emotionality on the market – take advantage of it!” is one of his favorite mottos. His time is divided mainly to analyzing various markets with emphasis on the precious metals, managing his own portfolio, writing commentaries, essays and developing financial software. Most of the time he’s got left is spent on reading everything he can about the markets, psychology, philosophy and statistics. Mr. Radomski has started investigating the markets for his private use well before starting his professional career. He used to work as an informatics consultant, but this time-consuming profession left him little time for his true passion – the interdisciplinary market analysis. Establishing www.SunshineProfits.com gave him the opportunity to put his thoughts, ideas, and experience into form available to other investors.
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