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Gold hits biggest fall since March 2: Will decline continue?

Metal hits a snag as it bocomes apparent that France will get a new president who is pro-growth, pro-business

Image Credit: Reuters
Gold loses some value as many investors now favour riskier assets.

Dubai: Investors are likely to continue favouring riskier assets over gold as it became apparent that France will soon get a new president with a pro-growth, pro-business platform.

The precious metal fell 1.5 per cent to $1,2651.51 an ounce on Sunday following the results of the first round of the polls that put centrist candidate Emmanuel Macron at the top of the race.  The decline was the biggest since March 2, according to Bloomberg.

Analysts expect the momentum to continue when the elections move on to the next round in May. Overall, however, gold is still trading higher than it did in the US elections in November or beginning of the year.

In Dubai, 24K was retailing at Dh154.40, still up Dh15 from January 1, 2017. Gold’s decline was offset by a weak US dollar, geopolitical issues and anticipation over US President Donald Trump’s big announcement on tax, among other factors.

“The gold net-long hit the highest since the US presidential election last November. This as it challenged the multi-year downtrend from 2011 at $1,292 an ounce. During the past year, this downtrend has been tested and rejected five times, “noted Ole Hansen of Saxo Bank.

“The outcome of the French election Sunday has left many recently established longs out of money and this is now creating some short-term selling pressure.”

“A weaker dollar, continued geopolitical concerns and uncertain week ahead for the US tax announcement, debt ceiling and Trump’s 100-day landmark has so far helped offset some of this selling pressure,” added Hansen.

Annemijn Fokkelman, ABN Amro private banking’s global head of equity strategy said the outcome of the French elections is favourable for the markets.

“For financial markets, this round was already decisive and I expect markets to react relieved. Stock markets have been rising for several months, but were recently held back by geopolitical concerns, among which the elections in Europe, such as the French,” said Fokkelman.

For the next round, ABN Amro’s base-case scenario is that Macron will win the elections. “Compared to the US, the environment for European equities is rapidly improving: we see signs of rising European economic growth, much stronger upwards earnings revisions than in the US and increasingly attractive valuations. The elections in Europe continue to represent risks, but we see these risks abating.”