Trump’s victory sent the dollar to a four-month high. This made gold more expensive for international buyers and depressed prices. Gold prices fell sharply as traders locked in profits against the rising US dollar. Thus, gold has reached key support levels, bringing with it the risk of further declines. Gold faces a critical test as investors watch the Fed.
While the dollar rose with Trump’s victory, gold fell!
cryptokoin.comAs you follow from , Donald Trump returned to the White House with a great victory. Following this, the US dollar gained strength and Treasury bond yields rose. Therefore, traders decided to lock in their profits. Thus, gold prices fell sharply on Wednesday. The underlying selling wave pushed prices towards a key technical support level at $2,708.76, shifting the trend downwards. Subsequently, it broke below the $2,697.28 pivot level, putting further pressure on the metal. Markets await the Fed’s policy announcement on Thursday. Gold now faces a critical test near the 50-day moving average of $2,636.66.
The dollar’s rise to its highest level in the last four months put significant pressure on gold. The dollar gained 1.4%, driven by Trump’s projected victory and Republican gains in Congress, with the ICE US Dollar Index reaching its strongest level since July. This made gold more expensive for buyers. Thus, it reduced its appeal as a non-returning asset. In response to Trump’s victory, investors expect a renewed focus on tariffs and fiscal stimulus, both of which could further strengthen the dollar if implemented. Analysts such as Wells Fargo’s Paul Christopher note that potential trade taxes could increase domestic business activity, which could strengthen the dollar and further pressure gold prices.
Bond markets are preparing for inflationary policies!
Bond markets reacted sharply to Trump’s election. The 10-year Treasury yield jumped to 4.47%, its highest level since July. Rising yields have increased the opportunity cost of holding non-interest bearing assets such as gold. This reduces the attractiveness of gold. The market also expects inflationary pressures from potential fiscal spending and tax cuts that Republicans could advance in a Congress they control. According to finance professor Jeremy Siegel, Republicans coming to power would likely bring about economic growth policies that would raise bond yields and raise inflation concerns.
It is possible that the rise in Treasury yields will have an impact on the Fed’s interest rate decision on Thursday. Markets expect a 25 basis point interest rate cut. However, any signs of a pause or slowdown in discounts would put further pressure on gold, which is already sensitive to rising interest rates and a strengthening dollar.
Market outlook: Bearish trend for gold as yields rise!
Market analyst James Hyerczyk evaluates the outlook for the gold market. With a strengthening dollar and rising yields, gold faces downside risk that could extend towards the 50-day moving average at $2,636.66 if the Fed takes a more cautious stance on future rate cuts. The market will now evaluate the Fed’s language and the inflationary risks posed by Trump’s policy agenda. Therefore, the bearish outlook for gold continues in the near term. If yields continue to rise and the dollar maintains its strength, gold will struggle to break above recent support levels. Additionally, this leads to further downside potential in the coming days.
