An ingot of 99.99% pure gold sits on the scales in Krasnoyarsk, Russia. Photo: Reuters / Ilya Naymushin

Gold and the Japanese yen seem to be investors’ preferred hedges against an upset victory by Donald Trump on November 8.

A Clinton victory would portend few changes in economic policy from the past eight years of Democratic administration in Washington, but a Trump victory would entail considerable uncertainty.

The Republican challenger if elected probably would favor more aggressive spending, particularly on national defense and infrastructure, as well as tax cuts.

The US deficit would rise, and bond yields presumably would rise as well.

For the time being, though, Trump is mainly dollar-negative. The chart below looks at the yen and gold at 15-minute intervals. Gold and the yen started gaining ground on October 28 when the FBI revealed that it had re-opened the Clinton email investigation.

The yen was a bigger mover over the week.

Investors have also adjusted their expectations about US economic activity downward, and that has weighed on the dollar. The chart below shows the 12th LIBOR future (the market’s expectation for the 3-month Eurodollar interest interest rate 12 months ahead), compared to the Japanese yen.

The big rise in Eurodollar futures (corresponding to a lower expected interest rate) followed the yen’s big move on Monday — suggesting that it was driven by political expectations, rather than by the tepid US GDP report that appeared Friday morning.

Gold dropped a bit in the morning, apparently on profit-taking, but gold and the yen remain the most sensitive hedges against a Trump upset next week.