Trump's victory takes gold to the lowest levels in 2 months!
Gold prices extended their slide to near two-month lows on Thursday, amid risk sentiment and as the dollar continues to strengthen after Donald Trump's election victory last week. Spot prices of the yellow metal have fallen nearly 7% since the election results last week to $2,559.2 an ounce. Gold futures on the New York Mercantile Exchange traded at $2,567.3.
Gold's recent slide has fallen in six of the seven sessions since Trump's victory following a streak of record highs for bullion over the past year. "There is a pause in the bull market in gold and silver, and that could continue for the next two weeks," said Citi's global head of commodities research, Maximilian Layton.
He elaborated that gold prices are likely to trade lower as US stocks rise on the prospect of lower taxes and regulations. Trump's return to the White House had sent US stocks to record highs even as the rally took a breather. Post-election risk sentiment has also lifted cryptocurrencies, with bitcoin briefly trading above $93,000 for the first time on Wednesday on hopes that Trump will deliver on a slew of promises to the industry.
"Trump looks like he's going to have a red flush and a higher deregulation, lower tax environment has driven money into stocks, money into bitcoin and money out of gold," Layton said. The dollar index also climbed to a one-year high, making dollar-priced gold expensive for holders of other currencies. "The rise in the US dollar reflects how markets are pricing in Trump's inflationary policy agenda, which mainly includes cutting taxes and tariffs," Commonwealth Bank of Australia's Vivek Dhar wrote in a note dated Wednesday.
Shares are in "euphoric territory" now as they factor in market-friendly election results, said Nicky Shiels, head of metals strategy at savings services firm MKS Pamp. "Until this Trump trade honeymoon phase ends, gold and silver are in the midst of repricing to a less bullish trajectory," she said.
Despite the slide in gold prices, market watchers are still bullish on bullion fundamentals. The fundamental drivers of the gold market are still in place, Layton said. Following Trump's election victory, there has been growing speculation about his tariff proposals and their potential impact on the global economy. "As that happens, people will buy gold and silver to hedge those downside risks," Layton said.
Additionally, central bank demand for gold is expected to remain strong, if not increase, due to the US fiscal outlook and rising geopolitical tensions, according to financial services firm Canaccord Genuity. Central banks bought record amounts of gold in the first half of 2024. "If President-elect Trump's second term is anything like the first, with a confrontational approach to friends and foes, we believe strong international demand for gold as an asset reserve is likely to continue relative to the demand for Treasuries," the bank's analysts wrote. in a report.
A mix of rising debt, geopolitical tensions and central bank demand is expected to support higher gold prices, Canaccord Genuity said.
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