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Donald Trump’s US presidential victory has spurred safe-haven buying of physical gold in Europe, but traditional bullion holders in the United States are standing pat. After all, many of them are optimistic after voting for Trump. The contrast in reactions to Trump’s surprise victory shows a wide difference in how investors in the two markets evaluate risk. For many outside the United States, Trump’s pledge to rewrite the play book on trade and international relations prompted defensive gold buying. US investors were more likely to be dumping gold in favor of stocks and bonds.
US precious metals investors “view a Trump victory as a good thing and, therefore, there’s not a tremendous amount of panic,” said Tarek Saab, chief operating officer and co-founder of Texas Precious Metals. Saab was a finalist in Trump’s reality TV show “The Apprentice” in 2006, and has golfed and dined with him.
“Since the majority of our client base were Trump supporters … that’s the reason we’ve seen a bit of slowness in the industry.”
Texas Precious Metals’ sales have tapered off around 20 percent in November from pre-election sales in October, the highest selling month of 2016 so far, Saab said. Gold is a traditional safe haven commodity that people buy in times of uncertainty, what some call a “fear trade.”
Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, which trades on NYSE Arca in the United States as well as other exchanges, have slid 4.8 percent since rising the day after the election. That was the biggest eight-day drop since April 2013.
Spot gold prices soared nearly 5 percent above $1,337 an ounce after the election, but have swooned since then to a 5-1/2-month low near $1,200.
“I feel as though Trump is generally positive for the economy and I am hopeful that a Trump presidency will help reignite our sluggish economics,” said Saab.
November gold sales at Dillon Gage, a large bullion dealer in Dallas, Texas, are also down slightly from October so far. They are, however, up from a year ago after seeing a 50 percent spike during the election week then falling around 20 percent the week that followed, according to the company.
“I think during the Obama years, there was a lot of angst in the country and that leads people to buy gold,” said Stephen Miller, chief executive of Dillon Gage.
Trump’s victory lessened what Miller called the “angst factor” among U.S. gold holders. Dealers who sell gold coins and bars in Europe, however, have been busy.
“Users have now added well over half a tonne since end-October (652 kg). That already makes November the strongest month for net inflows since December 2012 (702 kg) with almost 10 days still to go,” said Adrian Ash, head of research for BullionVault in London, referring to the online gold trading platform’s clients.
“New US interest has quieted since before the election. November’s first-time U.S. buyers (are) now up 35 percent above 12-month average (daily basis), just behind the Eurozone (up 39 percent) and U.K. (up 56 percent).”
In the United States, investors took a risk-on approach, lifting Wall Street’s three main stock indexes to record highs and the U.S. dollar to a 13-1/2-year peak on expectations that markets would benefit from Trump’s policies.
“What a Trump victory implies for Europe, combined with the Brexit vote, means established politics-as-usual may not win at the end of the day,” said Joe Foster, portfolio manager and strategist of VanEck International Investors Gold Fund in New York. “A lot of the people who invest in gold and silver are probably Trump supporters. They tend to be people that live in the heartland; be it more conservative, traditional-type people who use gold and silver more as a store of wealth.”