Gold Spikes Higher after FBI Announces Probe of Clinton Emails

December Comex Gold futures spiked more than 1 percent on Friday to its highest level since October 4 on Friday after the U.S. Federal Bureau of Investigation (FBI) said it will further investigate Democratic presidential candidate Hillary Clinton’s use of a private email system.

With less than two-weeks to go before the U.S. election, the news rattled the financial markets as well as Clinton’s campaign, shaking up some of the polls, the majority of which still show Clinton with a lead.

The December Comex Gold contract surged to $1285.40 before pulling back to $1278.70, up $9.20 or +0.72%.

The news of the FBI investigation shocked the gold market, driving weak shorts out of the market while attracting some speculative buying. Despite the intraday rally, traders are mixed about the outcome of the events. Some say trader reaction to this news may have jump-started the next rally in gold, while other feel that it comes too late in the campaign to sway the opinions of most voting Americans.

U.S. Economic News

Friday’s U.S. Advance GDP report came in slightly better-than-expected. According to government data, the U.S. economy grew by 2.9 percent in the third quarter, beating the consensus forecast of 2.5%. The data was strong enough to bolster the case for an interest rate increase in December. The Commerce Department also revised the previous quarter from 1.2% to 1.4%. The report showed the growth rate was the strongest since the third quarter of 2014.

In other news, the Advance GDP Price Index rose 1.5%, better than the 1.3% estimate, but lower than the previous 2.3%. The Employment Cost Index came in at 0.6% in line with expectations. Revised University of Michigan Consumer Sentiment was 87.2, below the 88.2 forecast and the previous 87.9. Worries about the election and the timing of the next Fed rate hike likely influenced consumers.

U.S. Dollar and Forex

The U.S. Dollar declined against the Japanese Yen and Euro on Friday in reaction to U.S. Advance GDP report. Although the headline number showed an improvement, investors were concerned over a key component of the report showed a deceleration in U.S. consumer spending in the third quarter.

Consumer spending, which accounts for nearly two-thirds of U.S. economic activity, increased at a 2.1 percent pace, but this was less than the previous 4.3 percent rate. This news was important to Fed watchers because it actually indicated the economy actually slowed down during the quarter.

The dollar weakened because the Fed is watching final domestic demand and not necessarily the headline GDP number. It may influence how investors read the chances for a December Fed rate increase. Currently, the probability of a Fed rate hike before the end of the year stands at 73%, according to the Fed Funds Indicator.