The gold price spiked and the dollar weakened in the hours following Donald Trump’s unexpected victory in the US presidential race.
The net result of the opposite directions was that gold will cost roughly the same today as it did yesterday for British buyers.
The price of gold soared by the most since the Brexit vote as it became clear Mr Trump was on course for triumph and investors searched for safe havens.
The dollar price surged by almost 5% to $1,337.38 an ounce, or £1065 for British buyers.
But the simultaneous weakening of the dollar, and a rebound on world markets this morning, has seen the pound price of gold retreat back to £1044 by 9.30am in London, the same price as two weeks ago.
British jewellers are beginning to spin-up their cash for gold businesses as it becomes cheaper to buy scrap than bullion priced in dollars, according to sources.
The gold price is likely to remain strong, business analysts predict. Concern over Trump’s approach to free trade “is going to throw the global system into a bit of chaos,” which will support gold prices, Mick Wilkes, chief executive officer of OceanaGold Corp., an Australian producer building a $380 million mine in South Carolina, told Bloomberg News.
In Asia, gold trading volumes have risen sharply. In China, SGE volumes have surged to 330 tonnes, 102% higher than the level seen around the Brexit vote. However, anecdotal evidence from bullion banks worldwide suggest that institutional investors and hedge funds have yet to come in, signalling a potentially sharper increase in gold demand as European and US trading opens.
Director of Bullion at The Royal Mint, Chris Howard, comments: “Now we have clarity, and a shock Trump victory declared, we expect to see significant volatility in the markets. We have seen this already in Asia overnight and will see the same in London and New York later in the day. Investors had factored in a Clinton victory in recent days and so this will lead to a rush to safe havens such as Gold.”
“It’s been an extraordinary few months with Brexit and now the unexpected outcome in the US – but there has been a positive impact on safe investments such as gold. Today’s figures are already some of the best on record, even surpassing our performance following the Brexit vote,” Howard adds.
The World Gold Council believes the retail demand for gold will surge as investors wake up to a fundamental political change in the world’s latest economy.
“In our view, the intense political uncertainty that advanced economies now face, combined with the unknown aftermath of years of unconventional monetary policies (quantitative easing, zero and now negative interest rates) will make gold particularly valuable to investors in the coming years,” the World Gold Council reports. “Gold is the only de-facto currency that cannot be debased by printing more of it, and the only one that does not carry political risk. There is a reason why gold has outperformed every major currency throughout history.”