The immediate aftermath of Trump’s election saw spot gold drop sharply, hitting a session low of $2,652.40 shortly after the North American market opened, reflecting a loss of 2.60% on the day. The dollar’s strength against other major currencies, such as the Mexican peso and Swiss franc, has made gold more expensive for international buyers, thereby reducing its attractiveness as a non-yielding asset. Investors are now closely monitoring potential changes in tariffs and fiscal policy under Trump’s administration, which could further bolster the dollar and exert additional pressure on gold prices.
In anticipation of the Federal Reserve’s policy announcement, markets expect a modest interest rate cut of 25 basis points. Such a move could provide some support for gold, as lower interest rates reduce the opportunity cost of holding non-interest-bearing assets. However, rising bond yields and a strengthening dollar have historically correlated with declining gold prices. The CME FedWatch Tool indicates a 98.1% probability of this quarter-point rate cut occurring in November.
Gold’s recent performance has been marked by volatility; it fell to a three-week low below $2,700 per troy ounce following Trump’s election victory. The Republican party’s success in securing control of both the Senate and House of Representatives has further fueled market optimism for economic growth under Trump’s policies, which include potential tax cuts and increased tariffs. These factors have contributed to rising inflation expectations and higher Treasury yields.
As traders digest these developments, analysts warn that while short-term pressures on gold are evident due to Trump’s policies and a stronger dollar, long-term prospects may remain bullish amid ongoing trade tensions and inflationary concerns. Historical comparisons suggest that gold prices may face continued downward pressure in the wake of Trump’s victory; however, some experts believe that markets are now better adjusted to his presidency than they were during his first term.
In conclusion, gold prices are currently under significant pressure due to the implications of Donald Trump’s election win and its impact on the U.S. dollar and Treasury yields. The upcoming Federal Reserve decision will be crucial in determining gold’s near-term trajectory as investors navigate an evolving economic landscape marked by potential inflationary pressures and shifting fiscal policies.
