Financial Daily from THE HINDU group of publications
Sunday, Oct 31, 2004
Financial Daily from THE HINDU group of publications Sunday, Oct 31, 2004 |
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Agri-Biz & Commodities
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Gold & Silver Will gold price soften after US polls? G. Chandrashekhar
Mumbai , Oct. 30 WILL international gold prices head lower after the US Presidential elections? Or, what will happen to the dollar? These are tricky questions that elude an answer. If history is any guide, gold prices are unlikely to rise, say experts. Geo-political concerns, a weak dollar, high crude prices and other factors have contributed to the current firmness in gold. There is nothing to suggest a dramatic improvement either in the geopolitical situation or economic growth conditions. Uncertainty ahead of the elections in the US has surely been a supporting factor for gold. "However, this uncertainty has changed in nature," according to Mr Kamal Naqvi, precious metals analyst with Barclays Capital. Originally, it was the potential for domestic terrorist attack in the run up to the election that was the prime concern. However, although terrorism of course remains a threat, now the focus of uncertainty appears to be the potential for legal contests in marginal seats to once again result in a delayed election declaration, the analyst points out. Stating that this assumption was important, Mr Naqvi said: "Looking at the six Presidential elections since 1980, we note that in all cases the gold price has trended lower (and, with only one exception, the dollar higher) following the US Presidential elections". The only dollar exception was Bush versus Gore 2000 election when the controversy over the Florida "chad" delayed the declaration of results by five weeks. However, in 2004, such a delay appears to be already priced-in with stories of `armies of lawyers' awaiting polling discrepancies circulating in the markets, and with speculative positions in both gold and euro standing near record long levels, explained the analyst. "For this reason, we highlight the potential for a clear-cut election victory (either by Mr Bush or Mr Kerry) as being dollar positive and, therefore, gold negative event," Mr Naqvi concludes.
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