(Kitco News) - In one fell swoop, the U.S. President has taken the prospect of new stimulus measures off the table until after the election, and according to some analysts, there is no reason to buy gold and silver until then.
In a sharp reaction to Trump’s comments on Twitter, gold, silver, and U.S. equity markets have fallen significantly. Falling through critical support at $1,900, December gold futures last traded at $1,898.30 an ounce, down more than 1% on the day. Meanwhile, silver prices have dropped 4% on the day as December silver futures last traded at $23.525 an ounce.
“We saw that nice bounce last week, and it looked like things were just starting to get going, and now the rally has been completely shut down,” said Charlie Nedoss, senior market strategist with LaSalle Futures Group.
Adam Button, chief currency strategist at Forexlive.com said that for gold to get back up to $2,000 an ounce, the markets need to see new stimulus spending. He added that gold has managed to hold recent gains as it appeared the Democrats and Republicans were getting closer to a stimulus deal ahead of the Nov. 3 election.
“In the short-term, Trump’s comments are going to be extremely negative for gold,” he said. “Investors are going to wait until after the election to buy gold.
Button added that Trump’s twitter comments also put his reelection campaign in serious jeopardy.
“I think Trump has just thrown away this election,” he said. “Nobody has lost an election for giving free money away.”
Button said that the election now becomes a referendum on stimulus measures, versus austerity.
“I firmly believe that in this economy, voters don’t care about deficits,” he said. “It is clear that Democrats want to release more stimulus measures, so if there is a sweep in Washington, gold prices are going to $2,500. But now we have to wait until after the election.”
As to how far gold prices can fall after giving up $1,900, both Button and Nedoss said that investors should keep their eye on at least $1,850 an ounce.
“I think we could get much lower than $1,850. I think we could get to $1,800 before people come in to buy this dip,” said Button.
Nedoss said that investors should also pay attention to the U.S. dollar as the U.S. dollar index looks like it wants to make a run back above 94 points.
“If the U.S. dollar starts to rally, then it will get ugly for gold,” he said.
