Will the Dutch Elections Revitalize Gold?
Gold prices are looking for their first gain in nine sessions as political uncertainty surrounding the Dutch national elections on Wednesday may help boost interest in the commodity.
Gold per ounce rose to $1,205 by early afternoon trading on Monday.
Advertisement
Gold prices have fallen victim of late to a strong U.S. economy and dollar, with investors forgoing gold due to a lack of demand for a hedge asset or inflation guard in the current economic climate.
The Dutch national elections, however, could see a return to bullion. With Geert Wilders and his anti-Euro, anti-Islam Party for Freedom currently set to win either the most or second-most seats in parliament compared to its rival parties, according to recent polling numbers, investors may flock to the precious metal following the result of Wednesday’s election. (Source: “Will Geert Wilders win the Dutch election? Latest polls for the Netherlands election 2017,” Express, March 13, 2017.)
While it is unlikely that Wilders will be able to form a ruling coalition with any of the other parties, a Party for Freedom gain could cause political turmoil in the Netherlands for the foreseeable future and may even prevent a coalition from being formed, potentially leading to another round of elections.
This amount of political uncertainty concerning how the Dutch and upcoming French and German elections will impact the euro has created renewed interest in gold as a risk-management asset.
Going against gold, however, is the increasing likelihood of a U.S. Federal Reserve interest rate hike. The Fed-funds futures market is currently pricing in a nearly 90% chance that the Fed will push interest rates higher, according to the “FedWatch Tool” from CME Group Inc (NASDAQ:CME).
The Fed will meet later this week with the talks concluding on March 15, which is when an interest rate increase would be announced. (Source: “Gold tilts higher as geopolitcal uncertainty comes into focus,” MarketWatch, March 13, 2017.)
