For all the unpredictability of President Donald Trump’s policies in his first 100 days, gold has failed to reclaim the heights before his win in November, and some investors doubt this will happen any time soon.
After closing at $1,305.06 an ounce on the Friday before Trump’s election, prices cratered more than 13% through December 22. They ground back to $1,289.76 this month after Trump’s air strikes on Syria and Afghanistan, and on worries over North Korea and the outcome of the French presidential vote, before slipping to as low as $1,263.17 on Thursday.
Without huge surprises from Trump, some investors are inclined to see more losses as the US economy stays strong, the Federal Reserve tightens, bond yields rise and inflation remains subdued.
Goldman Sachs Group predicts gold at $1,200 in three months after Emmanuel Macron won the first round of the French election and is projected to beat Marine Le Pen in the runoff.
“Every now and again, something geopolitical, or financial market-related causes people to knee-jerk buy gold, but the two key drivers over any extended period of time have been dollar debasement and inflation,” said Troy Gayeski, a senior portfolio manager at SkyBridge Capital in New York, which managed $11.8bn of assets as of February 28. “There’s very little discussion about buying gold now as an inflation hedge.”
The US central bank raised interest rates in March and stuck to projections for a further two quarter-point hikes this year and three in 2018. The cost of living unexpectedly declined last month for the first time since February 2016, and price increases slowed from a year earlier, according to the Labor Department. 
While the Bloomberg Dollar Spot Index is down almost 5% from its high in early January, the gauge has jumped more than 30% since 2011.
“There’s no doubt Trump is unpredictable,” said John Stephenson, chief executive officer of Stephenson & Co Capital Management, which manages C$55mn ($40.3mn). “The US economy is strong despite Trump. 
While his impulsiveness and unpredictability may lead to a rally in gold, it would be hard to see it going to more than $1,350, unless a nuclear war on the Korean peninsula was breaking out,” he said from Toronto.
Solid growth in the US and a consequent increase in real interest rates will drive down gold prices, according to Goldman Sachs. Economists at the bank expect two rate hikes by September, compared with market expectations of just one, and they see US 10-year yields rising to 2.75% in the second half of the year from about 2.31% currently.
Still, the concerns surrounding Trump and European politics aren’t going away soon, said Adrian Day, president of Adrian Day Asset Management, which oversees $190mn. Bullion will remain supported even as the US raises rates as they would still lag behind inflation, he said, while extended US stock gains are flagging risks to hedge fund managers, who are moving some money back into gold. Prices could climb close to $1,400 by the year-end, he said.
“You could see gold come off for the next couple of months,” Day said from Annapolis, Maryland. “I think the fundamentals are still pretty good for gold, in terms of we’ve still got low interest rates around the world. 
There’s still a high degree of uncertainty and lack of clarity about what Trump might do, and also what extent he’s going to be able to do what he has said he wants to do.”
Hedge funds and other speculators held their faith in gold through April 18, increasing wagers on a rally to the highest since November, according to US Commodity Futures Trading Commission data. Holdings in the SPDR Gold Trust, the biggest bullion-backed exchange-traded fund, have expanded almost 4% this year to near the largest since December.
Gold’s “going to be range-bound to modestly weaker until the Fed’s done hiking and starts to loosen monetary policy again,” said SkyBridge Capital’s Gayeski. 
“When the debate turns to will the Fed hike anymore at all and if they won’t, will they start to cut, that to us will probably be the start of the next great bull market in gold, but until then, you’re kind of in no- man’s land.”


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