Gold prices fell sharply on Tuesday, reaching their lowest point in nearly two months as the dollar strengthened and market sentiment shifted following the U.S. presidential election. The rally in the dollar and growing optimism about economic growth under a potential second term for President Trump dampened investor appetite for the precious metal.
Spot gold was down 0.7% at $2,600.93 per ounce by 2:23 p.m. EST (1923 GMT), after touching a session low of $2,589.59, the weakest level since September 20. U.S. gold futures also closed lower, settling at $2,606.30, down 0.4%.
The rise in the dollar index, which reached a four-month high, made gold more expensive for investors holding foreign currencies. This, combined with a continued surge in Bitcoin, seen by some as a hedge under Trump’s potential economic policies, added further pressure on gold prices. Additionally, U.S. Treasury yields edged higher, contributing to the market’s risk-on sentiment.
Daniel Pavilonis, senior market strategist at RJO Futures, commented that the current drop in gold is likely a short-term correction in an otherwise bullish market. “The policies right now are seen as inflationary, so if we experience another wave of inflation, gold should rise,” he explained. He also noted that $2,600 remains a key support level, suggesting the possibility of a rebound in the near future.
Market participants are closely watching a slate of economic data scheduled for release this week, including the U.S. consumer price index (CPI) for October, which could offer further insight into inflation trends. Additionally, comments from Federal Reserve Chairman Jerome Powell and other central bank officials will be scrutinized for hints on future monetary policy.
Following the Federal Reserve’s recent rate cut, reducing its benchmark interest rate to a range of 4.50% to 4.75%, traders now see a 59% chance of another rate cut in December, a sharp decline from the 80% probability seen before Trump’s election victory.
Gold had surged ahead of the election, buoyed by expectations of inflationary policies under a Trump administration, but has since cooled as the market’s focus shifts to growth prospects. Carsten Menke, an analyst at Julius Baer, pointed out that while the current market environment is suppressing gold in the short term, longer-term trends remain positive due to global economic shifts. Emerging market central banks are increasingly seeking to diversify away from the U.S. dollar, which could eventually drive gold prices higher.
In other metals, silver saw a modest gain, rising 0.2% to $30.72 per ounce, while platinum lost 2% to $945.39. Palladium saw a more significant decline, falling 3.5% to $946.59 per ounce.
As market participants await further data and Fed signals, the outlook for gold remains uncertain, with a mix of short-term volatility and long-term inflationary pressures likely to influence the metal’s trajectory in the months ahead.
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