Why Gold Prices Plunged After The Election

November 18, 2016

If before the election someone predicted gold prices would tumble following a Donald Trump victory, they probably would have been met with a great deal of skepticism. If any asset were going to benefit from a Trump win, it would be safe-haven gold, according to the conventional wisdom.

But just as the conventional wisdom was wrong about stocks and bonds, so too was it wrong about gold. Since the elections, it's been straight down for gold, which has lost nearly 4% of its value since last Tuesday. Prices fell as low as $1,211/oz earlier this week, the cheapest level since June.

YTD Gold Price


In the past week, gold faced two major head winds: interest rates and the dollar. Since Nov. 8, the 10-year bond yield increased by as much as 45 basis points―from 1.85% to 2.3%. At the same time, the U.S. Dollar Index surged nearly 2% to 100.57, the highest level in 14 years.

Higher rates and a higher dollar are a double-whammy for gold, which many investors see as a safe-haven alternative to Treasurys and sometimes even an alternative to the almighty greenback. These bearish developments prompted some investors to lighten up on the hefty gold positions they had built up during the course of the year, pushing down gold prices.

In the week since the election, outflows from the SPDR Gold Trust (GLD) and the iShares Gold Trust (IAU) totaled $1.7 billion. Combined year-to-date inflows for the two funds are still at record-setting levels, around $13.6 billion, but the aftermath of the elections has clearly dampened enthusiasm for gold among ETF investors.


Find your next ETF

Reset All