An employee handles a kilogram of gold bullion at the headquarters of YLG Bullion International Company on Friday, Dec. 22, 2023, in Bangkok, Thailand.
Chilli Thirsopa | Free Mp3 Download Bloomberg | Getty Images
Gold prices extended their losses to near two-month lows on Thursday and the dollar continued to strengthen amid risk sentiment and after Donald Trump’s election victory last week.
Place prices. The price of the yellow metal fell nearly 7 percent to $2,559.2 an ounce following last week’s election results. Gold deals were trading at $2,567.3 on the New York Mercantile Exchange.
The recent slide — gold has fallen in six of the seven sessions since Trump’s victory — follows a string of record-breaking milestones for the bullion over the past year.
“There is a break in the bull market in gold and silver, and it could continue for the next few weeks,” said Maximilian Leighton, global head of commodities research at Citi.
He explained that gold prices are likely to fall as US equities rally on the prospect of tax and regulatory cuts. Trump’s return to the White House 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 number of promises to the industry.
“Trump looks like he’s going to do a red sweep and more deregulation, the low-tax environment has driven money into equities, money into bitcoin, and money out of gold,” Layton told CNBC. told CNBC.
The dollar index also hit a one-year high, making greenback-denominated gold expensive for holders of other currencies.
“The rise in the US dollar reflects how markets have priced in Trump’s inflationary policy agenda, which mainly includes tax cuts and tariffs,” Commonwealth Bank of Australia’s Vivek said. Dhar wrote in a note on Wednesday.
Nicky Shills, head of metals strategy at trading services firm MKS Pamp, said that equities are currently in “happy territory” as they priced in the market-friendly outcome of the election. “Until this phase of Trump’s trade honeymoon runs its course, gold and silver prices are moving with less bullishness,” he said.
Despite the fall in gold prices, market watchers are still bullish on bullion’s fundamentals.
Layton said the fundamental drivers of the gold market are still in place. Since Trump’s election victory, speculation has been mounting about his tariff proposals and their potential impact on the global economy.
“As that happens, people will be buying gold and silver to hedge against these downside risks,” Leighton said.
Additionally, central bank demand is expected to remain strong, if not grow, due to the U.S. 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 his first, with confrontations with friends and foes alike, we believe a strong international outlook for gold as a reserve asset will continue,” the bank’s analysts wrote. Demand will continue to outpace demand for Treasuries.” Bank analysts wrote. in a report.
A combination of rising debt, geopolitical tensions and central bank demand will support higher gold prices, Canaccord Genuity said.
