Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
Gold is soaring as one of the most closely contested US elections in modern history spurs a rush to haven assets, and many investors see further gains ahead.
Bullion shot to fresh records this week, and prices are on course for their best year since 1979. Central banks and Chinese buyers initially led the charge, but demand has widened as investors seek protection from market turmoil ahead of next week’s vote. No matter who comes out on top, the rally may well continue.
“Markets like gold in uncertainty, especially when it has to do with geopolitical issues,” said Patrick Fruzzetti, portfolio manager at Rose Advisors in New York. “That’s a reason why you’d want to own gold going into the election.”
Some observers have suggested the margin of victory will be so narrow it will need to be decided by the Supreme Court. Others are doubtful it will come to that, but the neck-and-neck polling has left many expecting a nail-biting count.
Adding to the tension, Donald Trump and his allies are telling supporters they’re on pace for a runaway win. That sets the stage for lengthy legal challenges if the election doesn’t go their way, roiling markets further.
Some investors have bet heavily on a Trump victory and a so-called red sweep of the White House and Congress. Trades tied to his protectionist, pro-growth agenda have buoyed the dollar, which would typically dent gold’s appeal by making it more expensive for buyers using other currencies. Indeed, bullion tumbled back in 2016 when Trump was elected to his first term.
Yet this time around there are much greater concerns around the tightness of the race, and a close result could prompt investors to unwind bets on the greenback and equity markets and flock to haven assets. Spot gold traded near $2,750 an ounce on Friday, rising after US jobs data missed estimates.
Bullion is set to advance if “it takes time to resolve who the winner is,” said Robert Mullin, portfolio manager at Marathon Resource Advisors. “If it is definitive, you would probably see some risk coming out of the market.”
A victory for Kamala Harris would likely lead to an initial selloff, though the dip would be short-lived, Deutsche Bank analyst Michael Hsueh said in a note. A slide in the dollar resulting from a Harris win could boost buying power in countries such as China and India, while prospects for slower growth may also prompt quicker US interest-rate cuts, buoying gold.
Looking beyond the vote itself, there’s a key similarity between the two candidates that’s got bullion’s bulls betting on long-term gains: Both contenders have big spending plans that look set to strain America’s public finances even further.
“The market is comfortable with the idea that you will continue to get fiscal spending, no matter who wins,” said Calvin Yeoh, who helps manage the Merlion Fund at Blue Edge Advisors in Singapore. For that reason, “gold is the ark everyone around the world wants to get on board right now.”
Worries about the consequences of spending plans have been evident in the US bond market, where Treasury yields have climbed in anticipation of rising debt levels. That trend would normally make Treasuries more attractive than zero-interest assets such as gold. But bond investors are betting the splurge will also quicken inflation, eating into returns and tipping the scales back in gold’s favor.
There are diverse drivers behind this year’s historic price surge, and some investors say a resounding Trump victory could reinforce them, turbocharging the rally. But whoever ends up taking the White House, many believe gold can’t lose.
(By Yvonne Yue Li and Sybilla Gross)
Comments