MW: Gold, silver tumble as dollar soars on midterm elections
MADRID (MarketWatch) — Gold prices fell sharply on Wednesday as the dollar soared in the wake of the U.S. midterm elections, putting the precious metal on early track for its sixth straight loss.
Trading around four-year lows, gold for December delivery GCZ4, -2.44% slid $21.80, or close to 2% to $1,146.10 an ounce, while December silver SIZ4, -4.91% stumbled 71 cents, or 4.4%, to $15.24 an ounce.
Buoyed by news that Republican Senate candidates won sweeping victories Tuesday, the dollar USDJPY, +0.93% reached a fresh seven-year high against the Japanese yen. In general, gold tends to move inversely to the U.S. dollar. The dollar index DXY, +0.67% rebounded on Wednesday, rising back above the key threshold of 87, which it fell below on Tuesday.
“Republicans might be harder on the Fed and loose policy. There’s little reason to hold gold when forward interest rates are going in one direction,” said Chris Beauchamp, market analyst at IG, who answered questions via a Twitter exchange. “Why hold gold when it pays you nothing. Plus deflation fears are never good for gold.”
Louis James of Casey Research says that it’s times like these that test the discipline of investors in the resource sector, where “one is either a contrarian or one becomes road kill.”
He said if a broader market downturn sweeps metals prices lower along with it, “that would, of course, be a spectacular buying opportunity, precisely because so few people will take it. Easy to say, tough to do, and not the first time we’ve said it.”
Losses were just as severe elsewhere in metals trading, January platinum PLF5, -2.20% lost $15.10, or 1.3%, to $1,208.80 an ounce, while December palladium PAZ4, -4.33% slid $18.40, or 2.3%, to $772.10 an ounce.
High-grade copper for December delivery HGZ4, -1.41% fell 3 cents to $2.99 a pound, a fall of nearly 1%.
