Gold will benefit from Obama's second-term: David Lennox

David Lennox of Fat Prophets explains to CNBC-TV18 that gold will be one of the beneficiaries of the Obama's win as the various measures that will be taken to address the looming fiscal cliff including the continuance of the QE3 programme, will keep the dollar weak and add strength to gold.

Below is edited transcript of the analysis on CNBC-TV18

Q: What is the impact of the US Presidential elections on commodities?

A: The key commodity that we think will be impacted is gold. There is already a decent rally in the gold prices following the announcement that President Obama will go into a second term. We think going forward when you look at the US, there is definitely the possibility that it will face a significant 'financial cliff' as the various parties now have to negotiate the tax-hikes that they are planning to go through and also the spending programmes that Obama will be pushing through in his second term.

The reason we are thinking that gold will benefit is because all these factors will in fact have an impact on the US dollar and that will be to probably keep US dollar weak, especially as we know that Federal Reserve will now remain in place and their QE3 programme will continue. So when we throw all of those factors together we think that gold is probably really the key commodity that is going to benefit out of Obama’s second term.

Q: The Dollar Index has fallen off from its two months high of about 80.84 or so. What is the range that you foresee on the dollar index now?

A: That is really quite difficult range to put in at the moment, because there are a number of factors that will push the dollar down. We have not really looked at the forecast for next year, but certainly in the near-term, we expect it to probably go sub-85s when the market digests the news of Obama's re-election and a bigger government, bigger tax-hikes and the political deadlock being detrimental to the dollar.

So we think the risk is to the downside, but how far down, is really quite difficult at this point to put a handle on. We think somewhere in the 85-region is probably where it may settle or below.

Q: We have already seen Brent crude prices rise to about 3 percent after the polls started indicating that Obama was likely to be the winner. How much more upside would you give crude now from current levels?

A: The Brent reaction is probably somewhat of a surprise, because we actually think that when you look at the horizon for both West Texas and Brent, the demand side of the equation still looks very weak and with the US now likely to face tax-hikes and spending-cuts going forward, that we think will certainly take a lot of the confidence and a lot of the growth out of the US economy over the next 12 months.

With the US being the biggest consumer of petroleum products, that takes the confidence away from that market and we really do think that the risk for Brent and for West Texas at this particular point in time still remains to on downside barring any shock to supply.