“Gold’s Gloomy Outlook as ‘Risk-On’ Assets Reign Supreme Post-Trump Victory”

Spot gold ended the week at $2,684.03 an ounce, while December 2024 gold futures settled at $2,694.80.

Domestic gold prices also experienced a significant drop. SJC gold bars on Saturday (Nov 9) were quoted at 82-86 million VND per tael (buy-sell), compared to 87.5-89.5 million VND per tael a week ago. Meanwhile, SJC 9999 gold rings decreased to 83.32-85.15 million VND per tael, down from 83.32-85.12 million VND per tael in the previous week.

The Dollar Index, which measures the US dollar against a basket of its peers, climbed 0.6% this week.

“Over the past month, the narrative has revolved around the risks and uncertainties of the election, and whether the transition would normalize. However, this election seems to be decisive for the White House,” said Alex Ebkarian, CEO of Allegiance Gold.

“Many risky assets started to benefit from the potential impact of future policies, so we took money off the table from metals and moved to these alternatives,” Ebkarian Gold added.

The US Federal Reserve (Fed) cut interest rates by 25 basis points on Thursday (Nov 7) but indicated caution in further reductions.

Trump’s victory has raised questions about whether the Fed can continue to cut rates at a slower and smaller pace than expected, given the former president’s tariff policies, although Fed Chairman Jerome Powell stated that the election outcome would have no “short-term” impact on monetary policy.

The prospect of rate cuts, starting with a half-point reduction in September, has supported gold’s record-breaking rally this year. While bullion is considered an inflation hedge, higher interest rates diminish the appeal of non-yielding gold.

“If the market restores the odds of a Fed rate cut by Christmas… that should help keep spot gold prices above the psychological $2,700 level,” said Han Tan, chief market analyst at Exinity Group.

Kitco News’ survey revealed a predominantly bearish outlook among industry experts, while retail traders also turned pessimistic for the first time in months.

“Prices will go down,” said Darin Newsom, a senior analyst at Barchart.com. “While I think investors will return to gold for long-term risk aversion, the December contract has yet to end its short-term downward trend. This opens the door to a new round of selling early next week.”

David Morrison, senior market analyst at Trade Nation, indicated that the technical picture suggests gold prices will continue to fall.

“Gold prices fell on Wednesday (Nov 6) as it became clear that Trump had won a second term as US president. Much of the gold sell-off can be blamed on the surge in the US dollar after this news, as the greenback was boosted by a sharp rise in bond yields due to investor concerns that the tariffs and tax cuts Trump has promised will lead to a resurgence of inflation,” said Morrison.

According to Morrison, since the election outcome, the dollar and yields have returned to more reasonable levels. “This helped gold find a bottom and stage a mild rally on Thursday (Nov 7). But the rally fizzled out early Friday (Nov 8) morning, and gold once again came under selling pressure.” The support level is currently at $2,635-$2,675. This was the resistance level in the last week of September and early October. Gold attempted to break above $2,700 on Thursday evening but failed to hold this level as support. Instead, prices declined during the Asia-Pacific trading session until finding support around $2,680,” he added.

“Prices will go down,” said Adam Button, currency strategy director at Forexlive.com. “I think prices could move sideways after the election, but I’ll be watching closely for signs of who will be the next Treasury secretary. In previous elections, Trump announced Mnuchin on November 29, and Biden chose Yellen on November 23, so the upcoming announcement is probably not next week but soon. If the choice is John Paulson – a big gold speculator – then I expect gold to rally.”

“Gold will rise,” said James Stanley, senior market strategist at Forex.com. “It looked like gold prices would fall after the election, but the reaction since then has been quite positive, with bulls defending the $2,650 level and pushing prices to $2,700. Typically with that move, I would start to lean towards a bearish bias, but given how strong gold has been this year, I’m not yet ready to believe in a trend reversal, so I remain bullish.”

“It will go down,” said Adrian Day, president of Adrian Day Asset Management. “Gold’s continued decline would not be a disadvantage, as some investors are still taking profits even as both central banks and Chinese consumers are buying less than previous highs. However, the motivation for all these different buyers remains: the desire to diversify away from dollar dependence for some central banks, as well as China’s concerns about the economy and banks remain, while it is clear that the Fed and other central banks will continue to ease policy in the face of a slowing economy, even before inflation is completely extinguished, against the backdrop of high budget deficits with no prospect of control.”

“Remember that gold had a similar reaction to Donald Trump’s election in 2016, also due to optimism about economic growth, a strong dollar, and a strong stock market,” Day added. “At that time, the retreat lasted about six weeks.”

Frank Sohlleder, an analyst at ActivTrades, also believes that gold is likely to see further declines in the coming weeks. “Despite the upward trend, gold has not been able to escape the risk of a major correction,” he said. “Even the cut in key interest rates in the US cannot guarantee strong demand for gold. Therefore, it must be assumed that gold prices could continue to fall. Gold is currently trading at around $2,680 an ounce.”

“Down,” said Mark Leibovit, publisher of VR Metals/Resource Letter. “Trump’s success in the Middle East could slow gold’s upward momentum – which has risen in recent times due to conflicts. Yes, there are other reasons, and overall, my next big target of $3,700 remains unchanged, but I don’t have a specific timeline for that target at the moment.”

“In summary, we’re about to see prices drop,” he added. “The best strategy I’ve used is to maintain core long positions and hedge against risk using inverse gold and silver ETFs like GLL and ZSL.”

Colin Cieszynski, Chief Market Strategist at SIA Wealth Management, explained the short-term and medium-term impacts of the election on gold. He attributed much of gold’s decline on Tuesday night to the diminishing risks of electoral instability.

“I think what happened is that gold was priced according to the 2000 scenario,” he said. “After that, when there was a decisive winner – to some extent, it doesn’t matter who it is, just that there is a winner – a certain amount of event risk was removed. Less than a month ago, gold was at $2,600. Currently, gold is at $2,680, and the peak was around $2,780, so essentially, the increase has been from $2,600 to $2,780, and we’ve come back about halfway through that increase.”

The second factor Cieszynski cited was the US dollar, which strengthened significantly following Trump’s victory, exacerbating the gold sell-off.

“The US dollar has strengthened a lot,” he said. “The US dollar is the enemy of gold, and the US dollar has also had a rally, but that could also be due to the same underlying reason. The removal of election uncertainty boosted the US dollar and depressed gold. So, it’s not that ‘gold fell because the dollar rose,’ but rather, ‘gold fell AND the dollar rose’ because of this other event.”

“The inflation scenario probably won’t change much,” he added, “especially if [Trump] actually goes ahead with tariffs, which could be inflationary.”

The third factor Cieszynski believes could alter gold’s recent trajectory is the Fed returning to rate cuts.

“Looking at the medium term, one of the fundamental drivers of this gold rally has been central banks starting to cut interest rates,” he said. “They’ve been cutting regularly, and in some cases, they’ve been cutting quite aggressively. That could slow down. This is the first week we’re starting to hear rumors that the Fed might skip a meeting. Even last week, there were no such rumors. The Bank of Canada is still going full throttle, and some other banks are still cutting aggressively.”

This has devalued paper money and boosted the value of gold. “But if the situation starts to become one where central banks start to slow down the pace of rate cuts, that’s also a headwind for gold,” he said. “I think gold could move sideways for a while, which is normal.”

“I don’t fully believe that it will have a major correction,” Cieszynski added. “I don’t think it will go back to $2,000 or anything like that. Maybe $2,500, it could test $2,500 again.”

Turning to the short term, Cieszynski expects gold to face strong headwinds next week.

“I’m actually bearish for next week,” he said. “The reason I say that is that gold has had a big rally, and technically, it’s due for a correction. It might not be a major correction, but I think gold could struggle for another week.”

Fourteen analysts participated in the Kitco News Gold Survey, and the sharp sell-off this week left most Wall Street professionals predicting lower gold prices in the week ahead. Only three analysts, or 21%, called for gold to rise in the week ahead, while nine analysts, or 64%, predicted that gold would fall. The remaining two analysts, accounting for 14%, saw prices moving sideways.

Meanwhile, out of 249 votes cast in the Kitco News online survey, 114 voters, or 46%, predicted that gold would be up next week. Meanwhile, 91 people, or 36%, expected prices to fall, and 44 people, or 18%, were neutral.

Reference: Kitco News