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Sun 22 Dec 2019 10:19 AM

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Gold price barely flinches to impeachment noise, and change is unlikely

Trading volumes show December has been least volatile month for gold this year

Gold price barely flinches to impeachment noise, and change is unlikely

The gold price has remained steady throughout the past trading week, with another unusually narrow trading range noted between $1,470 and $1,481 as of time of writing. Unless trading volumes pick up in the lead up to Christmas, it appears that December will be the least volatile month for gold price this year.

It is common to point the finger at seasonality effects to explain why there has been a lack of volatility this time of year, although I don’t think this is the only reason for the reduced market movements.

Investors generally remain uncertain over the trade outlook between US-China, although US Treasury Secretary Steven Mnuchin’s comments on December 19 that both sides will sign the phase one deal early January next year helps showcase that bilateral trade relations are moving in the right direction at least.

Still 2020 is expected to remain dominated by headlines related to trade tensions and prolonged concerns over slowing global growth. These two factors combined earlier contributed to the gold price spiking throughout 2019 by over 15 percent. Gold started the year valued below $1,280 before later peaking above $1,555.

Aside from the persistently bleak global trade outlook that has encouraged the weakest world growth prospects since pre-2010, the US election in late 2020 will also be seen as a massive risk event to the gold price for next year.

Gold might not move too suddenly to election noise for now, but sensitivity should begin to pick up around the end of March - once the Democratic nominee to compete against current US President and Republican Donald Trump is clear.

Arguably, the most interesting developments taking place right now, but also one that investors are not reacting towards, is the breaking story that US President Trump has been impeached by the House of Representatives on the basis of allegedly seeking help from Ukraine to boost his chances of re-election. Trump is the third President in US history to have been impeached, but the probability of him being removed as US President is highly unlikely. 

The reason for the low probability of Trump being removed from office as President is correlated to the Senate being controlled by the Republicans.


(Source: BBC)

While the above chart can at first glance create a visual that Donald Trump is in danger of being removed from office, it does need to be taken into account that two-thirds of the Senate need to vote to convict him, something that has never happened in history and an even more unlikely outcome considering that the Senate is Republican controlled.

To make things clear on how unlikely it is that the Senate will not support the vote to convict the current US President, absolutely 0 members from the Republican Party within the House of Representatives voted to impeach Trump. And there is no reason to present to believe that this will change in the Senate.

Jameel Ahmad, Global Head of Currency Strategy and Market Research at FXTM

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