Gold price dips as dollar bounces but outlook strong ahead of French election
Gold moved down slightly today as the dollar rallied from a previous dip. This morning gold was returning to $1,282, having dipped to $1,278 earlier. The precious metal’s outlook remains good however ahead of the first round of the French presidential election and the stalling of US tax reform.
Globally the gold price looks to be well supported by ongoing geopolitical uncertainty over North Korea and the upcoming snap election in the UK in which the leader of the opposition, Jeremy Corbyn, has vowed to not “play by the rules”. More immediately, the first round of the French presidential election takes place on Sunday with polls yesterday suggesting Emmanuel Macron (23.6%) just ahead of far right extremist Marine Le Pen (22.5%).
American president Donald Trump’s treasury secretary Steven Mnuchin admitted the administration no longer expects to complete their tax reforms, viewed as a pro-growth, by August. The former Goldman Sachs banker told the Financial Times the reform timeline was “highly aggressive to not realistic at this point”, pointing to the executive’s stall in repealing Obamacare.
Investing.com also reported that only 40% of traders expect the Federal Reserve to hike interest rates in June, compared to 52.8% last week.
Elsewhere VanEck Vectors Junior Gold Miners ETF may be looking for a massive sale having become too big. CNBC reports the fund may have to sell as much as $2.6 billion worth of assets; the $5.4 billion exchange-traded fund owns giant positions in its underlying holdings, putting it at risk of violating certain Canadian and U.S. regulatory thresholds.
In order to comply with that regulation the ETF bought up stocks of companies that aren’t in its index, thereby creating a significant divergence between the ETF components and the index components. Last Thursday, VanEck (which runs both the ETF and index) acknowledged the divergence and announced it would broaden the scope of the index at the next rebalance date.
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