Gold Investors’ Big Dilemma: Who’s Scarier, Trump or Yellen

(Bloomberg) -- Even the prospect of higher U.S interest rates hasn't been enough to faze gold bulls as angst over the U.S. election puts the metal on course for a fourth straight weekly gain.

Gold had its longest weekly rally since July, with buyers undeterred as a report showing steady progress in the U.S. labor market strengthened the case for higher interest rates. Investors are seeking haven assets, with the MSCI All-Country World Index sinking to an almost four-month low and industrial metals such as aluminum and zinc falling.

The jobs report comes as polls showing a tightening race ahead of U.S. presidential election help rekindle demand for gold, which had slid last month amid signs the U.S. economy is improving. Analysts at Citigroup Inc. are among those saying further gains could be in store for bullion should Republican Donald Trump beat Democratic candidate Hillary Clinton, who is seen by some investors as the more predictable contender.

“On balance, the economic news on employment is less important in this environment,” Jeffrey Nichols, a senior economic adviser to Rosland Capital, said in a telephone interview. “What's driving gold for better or worse is the tanking sentiment about the upcoming elections, and the market's judgment about Trump's possible victory.”

Gold futures for December delivery rose 0.1 percent to settle at $1,304.50 an ounce at 1:42 p.m. on the Comex in New York, taking this week's advance to 2.2 percent. Prices are up for a fourth straight week, the longest rally since July 8.

Citigroup said gold could climb to as high as $1,400 if Trump wins. Trump is showing strength in Iowa and Ohio pre-election-day voting, while Hillary Clinton's advantage in early balloting looks stronger in North Carolina and Nevada, a Bloomberg Politics analysis shows.

Payrolls climbed by 161,000 last month following a 191,000 gain in September that was larger than previously estimated, a Labor Department report showed Friday. The median forecast in a Bloomberg survey called for 173,000. The jobless rate fell to 4.9 percent, while wages rose from a year earlier by the most since 2009.

The odds of a rate increase by the Federal Reserve in December rose to 78 percent, from 69 percent a week ago. The Fed said this week that it will wait for “some further evidence” of progress in the economy before raising rates. Higher rates curb the investment appeal of gold, which doesn't pay interest.

In other precious metals:

• Holdings in gold-backed exchange-traded funds rose 1.9 metric tons to 2,044.9 tons as of Thursday, data compiled by Bloomberg show. Assets are set for the first weekly gain in three.
• Silver futures slipped on the Comex, while platinum and palladium futures gained on the New York Mercantile Exchange.
• On the London Metal Exchange, copper, lead and tin advanced, while nickel declined.

To contact the reporter on this story: Luzi Ann Javier in New York at ljavier@bloomberg.net. To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Joe Richter