Gold and foreign exchange may witness lots of volume and trading if Trump wins, Citigroup says
Citigroup Inc. (NYSE:C) warns of gold and commodity volatility ahead as the first presidential debate for 2016 took place on Monday. According to the Bloomberg report, the polls suggest that the Republican candidate Donald Trump may have a 40% chance of winning the elections. Gold has rallied throughout the year as potential rate hike looms in 2016.
The first debate took place on Monday between the two parties and their candidates, where Hilary Clinton represented the Democratic party. The polls jumped higher from 35% after the debate, as the race between the two candidates tightened.
The note by Citigroup said: “Polls have started to tighten ahead of the U.S. presidential election, and Citi has raised the probability of a Trump victory. We expect a Trump win would bring out higher volatility in gold and forex, which in turn should lead to higher volumes in other precious metals.”
Gold bullion rallied 26% in 2016 as it rebounded from a consecutive three-year loss. Due to long standing low interest rates and uncertainty in the financial markets, gold has kept its value in 2016. Several analysts believe that the gold can rise up to $1,900 an ounce. Currently, an ounce price for gold is around $1,337.
Citigroup also said in the note that the investors await a rate hike which the Federal Reserve indicated can be as early as this December. Therefore, the markets would be impacted by the rate hike and cause more uncertainty, which again could be a catalyst for gold bullion.
Morgan Stanley has recently said that the markets are not considering and or believing Trump victory in the elections, which could create a havoc. However, as the polls are getting tighter, the investors and markets seems to adjust that believe on their portfolio and sentiments over the financial markets. Citigroup believes that a Clinton win would relatively have a less impact on the markets.