Gold price down 7% this November, driven by changes in the economy and global politics. As the value of the US dollar increases, and investor interest shifts, gold is becoming less attractive for many. In this article, we’ll look at what’s causing gold’s drop and explore where it might be heading next.
How US Politics Cause a Gold Price Decline
The recent political changes in the US are having a big effect on gold price. With the Republican Party now controlling Congress and the White House, the market expects more inflation and a stronger US dollar. Because gold is priced in dollars, a stronger dollar makes it more expensive for buyers from other countries. This reduces demand and pushes prices down.
How Interest Rates Influence Gold Price and Demand
Gold’s popularity is also influenced by interest rates. The Federal Reserve might lower interest rates by 0.25% in December, which would normally make gold more attractive, since gold doesn’t pay interest. However, with the dollar growing stronger, this rate change hasn’t been enough to drive up gold price.
Decrease in Gold ETF Investments
Gold ETFs, which let investors buy shares in gold without actually owning the metal, have seen a decline in demand. In early November, these ETFs saw outflows of about $809 million, mainly from North America. While Asian buyers offset this slightly, overall interest in gold ETFs remains low. Some hedge funds have sold off their gold positions as the price dropped, and investors are turning to other options, like Bitcoin, which is hitting record highs at over $90,000.
Investors Turn to Other Asset Classes
Investors are increasingly turning to other assets, such as US stocks, which are rising due to expectations of lower taxes and fewer regulations. As stocks become more profitable, capital is flowing out of gold and into the stock market. This shift is reducing gold’s appeal as a safe-haven asset, especially as investors seek better returns from equities.
Lower Gold Demand from China’s Slowdown
China, the largest gold consumer, is buying less gold due to its slowing economy. With concerns that US-China trade relations may worsen, Chinese demand for gold is dropping. This lower demand is affecting global gold prices, adding to the reasons behind November’s 7% decline.
Changes in Geopolitical Tensions Impact Gold Price as a Safe Haven
Gold is usually seen as a safe asset in uncertain times, but some global tensions are calming. South Korea recently decided not to send lethal aid to Ukraine, and the US is pushing for a ceasefire in Lebanon. While there is still unrest in some areas, any moves toward peace can lower the demand for gold, as fewer investors are looking for safe-haven investments.
Technical Analysis: Gold Breaks Major Trendline
Recently, gold fell below a major trendline, showing signs of a continued downtrend. Gold’s price has now dropped to $2,540, near the 100-day Simple Moving Average (SMA). If gold falls further below this level, the next support level would be around $2,477, reflecting the highs from July and August. However, gold’s long-term uptrend suggests it could still recover in the future.
Conclusion
Gold’s 7% price drop in November reflects changes in the US dollar, investor preferences, and global tensions. The shifting economic and political landscape has made gold less attractive for now. For daily updates on gold and trading signals, check out Daily Gold Signal, and for more gold market insights, visit our Daily Gold Update category.
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