Trump Victory Pushes Gold to 2-Month Lows as Investors Shift to Stocks, Cryptocurrencies
By Okafor Joseph Afam | November 14, 2024
Gold prices have extended their decline to a near two-month low as risk-on sentiment dominates the market and the dollar strengthens in the wake of Donald Trump’s re-election. On Thursday, spot prices of gold fell nearly 7% since Trump’s election victory last week, reaching $2,559.2 per ounce, while gold futures on the New York Mercantile Exchange traded at $2,567.3.
This recent slide marks a pause in what had been a steady bull market for precious metals, with gold falling in six out of the last seven sessions. Over the past year, gold saw record-breaking highs, but with U.S. stocks surging on expectations of lower taxes and deregulation under Trump’s administration, the demand for safe-haven assets has waned.
“There’s a pause in the bull market in gold and silver, and that may continue for the next couple of weeks or so,” said Citi’s global head of commodities research, Maximilian Layton. He noted that U.S. equities are rallying on hopes of favorable economic policies, leading investors to favor stocks over traditional safe assets like gold.
This post-election risk-on environment has also fueled a surge in cryptocurrency markets. Bitcoin briefly crossed the $93,000 mark for the first time on Wednesday, spurred by optimism that Trump may enact industry-friendly policies. “With Trump likely to pursue deregulation and lower taxes, we’re seeing a shift of funds into equities, into bitcoin, and out of gold,” Layton told CNBC.
The dollar index, which measures the currency’s strength against other major currencies, has risen to a one-year high, making dollar-priced gold more expensive for international investors. “The rise in the U.S. dollar reflects how markets have priced in Trump’s inflationary policy agenda, which primarily includes tax cuts and tariffs,” wrote Vivek Dhar, commodities analyst at Commonwealth Bank of Australia.
Stock markets remain in what Nicky Shiels, head of metals strategy at MKS Pamp, described as “euphoria territory” as investors price in Trump’s market-friendly policies. “Until this Trump trade honeymoon phase runs its course, gold and silver are amidst repricing to a less bullish trajectory,” Shiels added.
Despite gold’s recent downturn, some analysts remain optimistic about the long-term fundamentals for the metal. Layton noted that Trump’s potential trade and tariff policies could introduce economic risks that drive renewed demand for gold as a hedge. “As that happens, people will be buying gold and silver to hedge those downside risks,” he said.
Financial services firm Canaccord Genuity echoed this sentiment, pointing to sustained central bank demand for gold. In the first half of 2024, central banks purchased a record amount of gold, a trend likely to continue amid rising U.S. debt levels and global geopolitical uncertainties.
“If President-elect Trump’s second term mirrors his first, with a confrontational approach to foreign policy, we expect strong international demand for gold as a reserve asset,” Canaccord analysts wrote. The firm anticipates that a combination of rising debt, heightened global tensions, and sustained central bank interest will support higher gold prices in the future.
