The gold market is feeling the heat, with prices slipping further as the post-election fallout from Donald Trump’s re-election impacts the precious metal. On Friday, gold (XAU/USD) fell around $2,690, extending its current bearish trajectory amid expectations of stronger U.S. economic policies, a stronger dollar, and elevated interest rates. These developments, combined with investor confidence in riskier assets like Bitcoin and equities, are pressuring gold—a traditional safe-haven asset—downward.
Gold Struggles Under Stronger Dollar and Rate Expectations
Gold has been caught in a downward spiral, mostly due to market anticipation that Trump’s economic policies will bolster the U.S. dollar. Analysts predict that Trump’s agenda, likely featuring tax cuts and tariffs, could sustain higher interest rates, drawing foreign capital into the U.S. This expectation of a stronger dollar often results in a negative outlook for gold, which is priced in dollars; as the dollar strengthens, gold tends to weaken.
Adding to this pressure, the University of Michigan’s Consumer Sentiment Index for November revealed improved consumer confidence, rising to 73 from 70.5 in October, surpassing expectations of 71. This increase in consumer confidence could lead to higher interest rate forecasts, further weighing on gold.
Temporary Rebound Following Fed Rate Cut
Gold managed a brief recovery following the Federal Reserve’s decision on Thursday to cut interest rates by 25 basis points, lowering the federal funds target range to 4.50%-4.75%. Typically, lower rates decrease the opportunity cost of holding gold, a non-yielding asset, which can temporarily lift demand. However, gold’s relief was short-lived as market sentiment remained pessimistic, with no significant changes in the Fed’s statement regarding the economic impact of Trump’s re-election.
Fed Chair Jerome Powell also refrained from speculating on Trump’s policies, instead focusing on economic indicators, noting the labor market’s gradual easing. Although some investors saw this as a signal of caution, it wasn’t enough to maintain gold’s upward momentum amid stronger dollar forecasts.
Also read : Gold Prices Tumble 0.67% Amid US Dollar Surge, Investors Eye Inflation Data
Gold Faces Additional Pressure from Crypto and Equity Market Shifts
Another factor undermining gold is the increased investor interest in alternative assets. Bitcoin, for instance, reached an all-time high on Thursday due to speculations that Trump’s administration might ease crypto regulations. U.S. stocks also experienced gains, buoyed by expectations of a favorable business climate under Trump, including potential tax cuts and reduced regulations. This shift in portfolio preferences is pulling investment away from gold.
Trump’s foreign policy assertions, including claims to swiftly end the Ukraine conflict, may also be reducing demand for safe-haven assets. Although his statements are controversial and have raised some skepticism, they still influence the risk sentiment, leading investors to favor riskier assets over gold.
