Gold price (XAU/USD) is trending downward, trading around the $2,700 mark, as recent economic expectations suggest President-elect Donald Trump’s policies could boost the US Dollar. His proposed tax cuts and higher tariffs are likely to support high-interest rates, making the dollar more attractive to investors. Because gold is priced in USD, its value is sensitive to fluctuations in the currency’s strength, with stronger dollars typically pressuring gold prices lower.
Gold’s Temporary Bounce After Fed Meeting
The Federal Reserve’s recent November meeting led to a brief rebound in gold price as the Fed announced a 25 basis point cut to interest rates, setting the range between 4.50% – 4.75%. Lower rates often make gold more appealing since it doesn’t earn interest, reducing the opportunity cost of holding the precious metal. Despite the rate cut, the Fed refrained from mentioning the potential impact of the US presidential election on the economy. The statement remained nearly identical to previous meetings, noting only that “labor market conditions have generally eased.”
Fed Chairman Jerome Powell addressed the post-election landscape but withheld detailed insights about Trump’s proposed policies, stating it was too early to determine the “timing, (or) substance of policy changes.” He noted that recent increases in US Treasury yields were not likely driven by inflation expectations, hinting at a possibly cautious economic outlook, which can support demand for safe-haven assets like gold.
Gold Weakens as Trump’s Victory Drives US Dollar Up
Gold price took a sharp decline after Trump’s re-election. Investors anticipate that his economic strategies will drive the US Dollar higher, which generally results in gold prices decreasing. Trump’s election win encouraged a move away from safe-haven assets like gold and toward riskier investments, including Bitcoin and stocks. Bitcoin, in particular, saw a record high on expectations that Trump may adopt a lenient stance on cryptocurrency regulation. Meanwhile, stocks surged in response to potential tax cuts and relaxed regulations. As a result, gold faced outflows, reflecting portfolio shifts among investors.
Trump’s bold assertions about swiftly ending conflicts in the Middle East and Ukraine also reduced safe-haven inflows. His statement, “I will have that (Ukraine-Russia) war settled in one day – 24hrs,” might be hyperbolic, but it had an impact. Additionally, the US’s increased military activity in these regions, such as the deployment of B-52 bombers as a precaution against Iranian aggression, contributed to the uncertainty, pulling investors away from gold.
Technical Analysis of XAU/USD – Short-Term Pullback
Gold recently rebounded after hitting support following the election-driven selloff. Although this uptrend could be temporary, it aligns with the broader principle in technical analysis that “the trend is your friend.” The Relative Strength Index (RSI) has exited oversold conditions, signaling an opportunity for sellers to take profits and buyers to initiate cautious positions. The Moving Average Convergence Divergence (MACD) indicator has also crossed above its signal line, suggesting potential for continued upward correction.
However, given gold’s short-term bearish trajectory, a sustained recovery remains unlikely in the immediate future. If XAU/USD breaks below the recent low of $2,643, further declines are likely, with $2,605 as a potential support target. Long-term, gold maintains an upward trajectory, making a substantial reversal possible.
Conclusion
Gold’s current downtrend reflects both technical and fundamental pressures, driven by a stronger US Dollar amid Trump’s anticipated economic policies. With market sentiment focused on these policy effects, gold may continue to face downward pressure in the short term.
For more insights on gold’s movement, see our Daily Gold Update and visit Daily Gold Signal for daily updates.
