Gold price retreats after initial surge on US election result

Gold
Source: World Gold Council

The price of gold fell back from the sharp gains made earlier on Wednesday, after a conciliatory victory speech from U.S. president-elect Donald Trump also helped the dollar rebound.

Gold had surged by nearly 5 percent to a six-week high of $1,337.40 an ounce as it emerged that the Republican nominee had triumphed over Democrat Hillary Clinton in the presidential election, a surprise for markets which prompted investors to seek refuge in perceived safe-haven assets like gold.

But gold's price later fell back below $1,300 an ounce as the U.S. dollar moved higher and stocks trimmed losses.

Spot gold was down 0.19 percent at $1,272.66 by 2:55 EDT, while U.S. December U.S. gold futures settled at 1273.50 an ounce, having peaked at $1,338.30.

"Mr Trump managed to sound quite conciliatory and presidential in his victory speech this morning," Mitsubishi analyst Jonathan Butler told the Reuters Global Gold Forum on Wednesday. "There was none of the harsh rhetoric that we heard during the campaign."

"This calmed the markets and helped boost the dollar, eroding gold's gains," he said. "(But) the Trump win is still essentially bullish for gold."

The dollar, Mexican peso and world stocks initially fell on Wednesday as Trump swept to victory, but fears of a Brexit-style shock that wiped trillions off global markets failed to materialize.

Trump's win threw into question the core assumption in financial markets that the Federal Reserve will raise interest rates soon and follow with further gradual hikes over coming years.

Speculation has mounted that Fed chair Janet Yellen may resign before the end of her term in January 2018, after Trump accused the U.S. central bank of keeping rates low to favor incumbent President Barack Obama, and indicated that he might replace Yellen.

Davis Hall, head of forex and precious metals at Indosuez, said gold's retreat suggested upside for the precious metal was limited, but that the metal could still benefit from a Trump victory as the longer-term implications emerged.

"I still think stocks are going to digest this over a 10-day period, and 10 days from now stocks will be lower than they are now," he said. "If the S&P breaks 2,000, gold will be up $100."

Spot silver was at $18.62 an ounce, up 1.5 percent, having risen to its highest since Oct. 3 at $18.996 an ounce. Platinum was 0.7 percent higher at $1,009.60 an ounce, while palladium was up 0.8 percent at $668.30.