Gold hits record high, stocks fall on US election worries

By Chibuike Oguh and Amanda Cooper

NEW YORK/LONDON (Reuters) – Gold prices hit record highs on Wednesday, defying a rise in the dollar that kept pressure on the yen and euro, while global stocks fell on investors’ reluctance to make big bets ahead of the U.S. election , gave in slightly.

Investors are also reconsidering how much the Federal Reserve may need to cut interest rates after recent U.S. economic data suggests the economy continues to grow and create jobs.

Markets are pricing in a 92 percent chance of a 25 basis point rate cut at the Fed’s next meeting in November and another 25 basis point cut by the end of the year. A month ago, traders had priced in cuts of up to a full percentage point by January. The benchmark 10-year U.S. bond yield hit a three-month high and was last up 3.8 basis points at 4.244%.

“The rising yields suggest that a pro-growth government may be coming to power and there is some fear of deficit spending,” said Thomas Hayes, chairman of Great Hill Capital in New York.

On Wall Street, all three major indexes were lower, driven by losses in consumer discretionary, healthcare and technology stocks.

The Dow Jones Industrial Average fell 0.52% to 42,700.16, the S&P 500 fell 0.36% to 5,830.00 and the Nasdaq Composite fell 0.56% to 18,469.35.

The MSCI All-World index fell 0.41% on the day, reflecting weakness in Europe, where the STOXX 600 fell 0.06%.

“This week’s stock price movements suggest that reaching the 50th record high for the S&P 500 could be a difficult task given the approaching US election,” said XTB research director Kathleen Brooks.

The odds of Donald Trump beating Kamala Harris have increased slightly on betting sites recently, although opinion polls show the race to win the White House remains too close to call.

The prospect of another Trump presidency is on investors’ minds as his policies include tariffs and restrictions on illegal immigration, among other measures, that are expected to drive up inflation.

“There is an illusion that if Trump wins, you want to buy energy. Energy actually underperformed over the period 2016 to 2020. What outperformed, and people should buy on that basis, would be industrials like Boeing, smallcaps and, believe it or not, emerging markets and China stocks,” Hayes added.

Gold shrugged off U.S. dollar strength to rise to a new record high of $2,757.99 an ounce. Demand for gold as a safe-haven asset is being driven in part by concerns about the U.S. election and geopolitical tensions in the Middle East and Europe.

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