Okay, you may want to follow along closely, because the trail is a little tricky, but the Wall Street Journal’s reasoning goes something like this:
Investors believe that “…a Trump presidency would add uncertainty to an already shaky global economic and geopolitical picture.”
And that has naturally been causing the price of gold to rise recently, since uncertain economic situations tend to make people want to hang on to a solid substance, rather than flimsy pieces of paper whose worth frequently fluctuates up and down. The article added that the price of gold will very likely remain volatile all the way up to the election.
WSJ went on to quote a research note from Commerzbank, which read, “The tension on the gold market appears to have eased initially after most observers agree that presidential candidate Hillary Clinton clearly came out on top in the first TV duel with her opponent, Donald Trump.”
Other factors were certainly mentioned as potential causes for volatility, such as fallout from Brexit. But a closer look will reveal a passing mention of what the Fed might have up its sleeve. Aha!
Joni Teves, a metals analyst at UBS, was quoted as saying, “The core driver for our view on gold remains interest rates, and the expectation that rates are going to remain low for some time…”
In fact, Teves continued, “Generally, we could get some choppy price action for the remainder of the year.”
So the article’s premise was that a Trump presidency would throw the world into chaos, which would raise the price of gold. And since the first debate made that seem less likely to happen, the price of gold dropped a bit. However, since no one can actually be sure until after the election, the price will probably fluctuate until then.
Closer inspection reveals that the price more likely will depend on what the Fed does about interest rates, and fluctuate until the end of the year. Although it’s certainly not out of the question that both are possible.