Should Gold Investors Panic as ETF Just Saw Its Largest Weekly Outflow in More Than 2 Years?

金价一路飙升,金矿公司股价显然有所低估
Published on: Nov 11, 2024
Author: Caroline Kong

Precious metals gold and silver were sold off by investors in the past week, as news of Donald Trump as US president boosted stock market and risk assets such as bitcoin.

December gold futures was down $34.50 at $2,660.30, silver contract was down $0.299 at $31.15, while the dollar index surged to a four-and-a-half-month high on Monday (11 November), as short-term futures traders faced technical selling pressure and more profit-taking as well.

Meanwhile, the SPDR Gold Shares (GLD), the world’s largest gold exchange-traded fund, saw outflows of more than $1 billion last week since Trump’s victory, the biggest one-week outflow since July 2022, according to Bloomberg.

Precious metals analysts at Heraeus said the fall in the price of gold since Trump’s win has been linked to both political parties and candidates, while demand for silver from the global solar industry has continued to rise as technology develops and countries exceed installation targets.

Historically, Republican victories have not favoured the near-term outlook for gold, with the price of gold falling 11.6% after Trump’s victory in 2016, analysts noted in their latest precious metals report.

Analysts note that the decline in precious metals prices is not all due to Trump, as the election of Republican administrations since 1976 has led to an average 4.5 per cent fall in the price of gold over a 60-day period, while gold prices have risen by an average of 3.8 per cent in the first two months following a Democratic victory.

Analysts believe that the prospect of possible Republican control of the House of Representatives and the Senate increases the likelihood that conservative economic policies will be implemented and reduces geopolitical uncertainty, which help drive gold prices in the past few months.

Going forward, import tariffs and tax cuts that may be implemented by the new U.S. administration could spur inflation and widen the federal deficit. If inflation rises, the Fed’s rate-cutting path may have to be slowed or altered.

Meanwhile, solar will continue to soak up silver supply as the industry’s demand for the grey metal increases with the expansion of solar capacity and technological shifts. China’s solar industry added 102.48 gigawatts of capacity in the first half of 2024 alone, bringing the current total to 711 gigawatts, a 140 per cent increase year-on-year.

Analysts expect global capacity additions to reach 550-600 GW this year, surpassing the 447 GW added in 2023. Considering that silver supply has been in deficit for several years in a row, an improvement on the demand side will be beneficial in stabilizing prices.

Concerns over US debt sustainability and the overall economic outlook are expected to continue to support gold prices, Heraeus analysts added. During the Trump administration, investors expect government spending to increase, which could increase the debt-to-GDP ratio. In the short term, gold is expected to see strong support and buying interest around $2,600 per ounce, with the recent wild rallies in U.S. stocks and bitcoin likely to come to an end for now.

 

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