Gold prices are headed for a weekly loss as the yellow metal was battered by a rising dollar after Donald Trump’s victory in the 2024 US presidential elections.
Gold prices on COMEX are set to lose more than 2% since last week’s close as prices trade below the $2,700 per ounce mark on Friday.
“The recent slide in gold prices is largely due to a strengthening US dollar, buoyed by investor expectations that economic policies under former President Donald Trump may spur growth and inflation,” Arslan Ali, analyst at Fxempire, said in a report.
The rise in dollar makes commodities priced in the greenback less appealing for overseas investors, which limits demand and drags down prices.
Silver prices were also down on Friday.
Among industrial metals, copper prices on the London Metal Exchange (LME) fell as traders shifted their focus to a meeting of China’s National People’s Congress.
Meanwhile, the US Federal Reserve cut interest rates by 25 basis points at its policy meeting late on Thursday.
The decision was in line with market expectations and followed a super-sized rate cut of 50 bps from the September meeting.
Why is gold falling despite the Fed rate cut?
Gold prices have suffered since election day in the US earlier this week.
The swift nature of the US election without any controversies, removed the uncertainty risk premiums from gold prices.
As Trump’s victory was clear and swift, Treasury yields and the dollar surged on Wednesday.
This weighed on the non-yielding metals such as gold and silver.
Moreover, Trump’s victory also increased risk-on sentiments among investors.
As a result, the safe-haven appeal of gold declined and prices suffered, according to experts.
Ali said:
The risk-on sentiment in broader markets, spurred by optimism over Federal Reserve support and potential fiscal measures in China, contributed to the pullback in gold.
Lower interest rates tend to benefit gold prices as the yellow metal does not fetch any interests unlike bonds.
China’s economic data and trade tensions
China’s expanding trade surplus, which rose to $95.27 billion in October—well above expectations of $75.1 billion—indicates robust global demand, especially for industrial goods, according to Fxempire.
Exports also grew by 12.7% on a year-on-year basis in October, exceeding expectations of a 5% rise.
China’s imports fell by 2.3%, worse than the expected 1.5% decline, hinting at subdued domestic consumption.
The conflicting data added more uncertainty to the financial markets.
Lower imports could mean weaker domestic demand for commodities such as gold and oil.
While increasing exports indicate that industrial activity was resilient in October.
Even though industrial demand would support sentiments for silver, it won’t hold true for gold.
Robust industrial activity in the second top economy of the world would further deplete the safe-haven appeal of gold even as jewellery demand was already subdued.
However, a silver-lining would be increased trade tensions with the US.
With Trump back at the White House, the president-elect could increase tariffs on all imported goods from China.
According to experts, if countries align with China due to strained trade relations, a shift in global alliances would destabilise economic conditions, which could benefit gold.
Muhammad Umair, analyst at Gold Predictors, said in a report on Fxstreet:
As countries pivot towards China’s economic sphere, weakening the US dollar could make gold more attractive to international investors, potentially boosting gold’s price.
Short-term forecast
In the short-term, the trend in gold prices remains bearish.
If prices drop below $2,668 per ounce on COMEX, it could intensify selling, according to analysts at Fxempire.
If gold breaks above its resistance at $2,696.64 per ounce, then prices could rise above the psychological level of $2,700 per ounce.
“Traders are closely watching these levels to gauge the next direction, as any sustained move above or below could signal a change in momentum,” Fxempire’s Ali said.
In some positive news for the gold market, the US Fed Chair Jerome Powell said on Thursday that the economy remained resilient and the central bank would ease monetary policy further.
According to the CME FedWatch tool, traders priced in a 74.5% probability of the Fed cutting rates by a further 25 bps at its December meeting.
At the time of writing, the December gold contract on COMEX was at $2,696.10 per ounce, down 0.4% from the previous close.
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