An employee handles one kilogram of gold bars at the YLG Bullion International Co. headquarters in Bangkok, Thailand, Friday, December 22, 2023.
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Gold prices extended losses on Thursday to a near two-month low as risk appetite surged and the dollar continued to strengthen after Donald Trump won the election last week.
spot price Gold prices have fallen nearly 7% to $2,559.2 an ounce since last week’s election results. Gold futures on the New York Mercantile Exchange were trading at $2,567.3.
The latest slide – gold prices have fallen in six of seven sessions since Trump’s victory – comes after a series of record-breaking milestones for gold over the past year.
“The bull market in gold and silver is on hold and this is likely to continue for a few weeks or so,” said Maximilian Leighton, Citi’s global head of commodities research.
He explained that gold prices are likely to move lower as U.S. stocks rise on the prospect of lower taxes and regulations. Trump’s return to the White House pushed U.S. stocks to record highs, although gains took a breather.
Post-election risk sentiment has also boosted cryptocurrencies, with Bitcoin trading above $93,000 for the first time on Wednesday on hopes that Trump will deliver on a series of promises to the industry.
“Trump looks like he’s going to do a red sweep and increase deregulation and lower the tax environment, causing money to flow into stocks, money to flow into Bitcoin, money to flow out of gold,” Layton told CNBC.
The U.S. dollar index also climbed to a one-year high, making dollar-denominated gold expensive for holders of other currencies.
“The dollar’s gains reflect how markets are pricing in Trump’s inflationary policy agenda, which mainly includes tax cuts and tariffs,” Commonwealth Bank of Australia’s Vivek Dar wrote in a note on Wednesday.
Nicky Shiels, head of metals strategy at stampede service MKS Pamp, said stocks are now in “optimistic territory” as they reflect a market-friendly election outcome. “Gold and silver are re-pricing towards a less bullish trajectory ahead of the end of the Trump trade honeymoon phase,” she said.
Despite the decline in gold prices, market observers remain optimistic about gold price fundamentals.
Leighton said the fundamental drivers of the gold market remain in place. Since Trump’s election, speculation has grown about his tariff proposals and their potential impact on the global economy.
“When that happens, people will buy gold and silver to hedge against those downside risks,” Leighton said.
In addition, financial services firm Canaccord Genuity said it expects central bank demand for gold to remain strong, if not grow, due to the U.S. fiscal outlook and heightened geopolitical tensions. Central banks bought record amounts of gold in the first half of 2024.
“If President-elect Trump’s second term is as confrontational toward friends and foes as his first, we believe the international community will be more vulnerable to demand for national debt relative to its need for national debt,” the bank’s analysts wrote. Demand for gold as a reserve asset is likely to remain strong.
Canaccord Genuity said factors such as rising debt, geopolitical tensions and central bank demand are expected to support higher gold prices.
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