Gold prices faced a setback on Wednesday, pausing their recent rebound as a surge in US Dollar (USD) demand pushed the precious metal lower. This pullback comes amid the release of exit polls from the 2024 US presidential election, which show Republican nominee Donald Trump leading in over a dozen states, including several key battleground areas.
Election-Driven Market Dynamics
Trump secured wins in 14 states, while Democratic nominee Kamala Harris captured four states and Washington, D.C., according to Edison Research. However, with many results still pending, a definitive outcome is far from clear. Exit polls in the swing states suggest a tight race between Trump and Harris, adding to the uncertainty.
As market sentiment tilts toward a potential Republican victory, the US Dollar strengthens, buoyed by optimism surrounding Trump’s policies. Investors are flocking to the Greenback, alongside rising US Treasury bond yields and Bitcoin, which in turn diminishes the appeal of non-yielding assets like gold. The US benchmark 10-year Treasury bond yields reached their highest intraday levels since July 3.
Markets anticipate that Trump’s immigration, tax cut, and tariff policies could exert upward pressure on inflation, bond yields, and the US Dollar. Despite the near-term weakness in gold, some analysts believe that, over the medium to long term, gold could benefit as Trump’s foreign policies, particularly toward China, may fuel market instability and unrest.
Gold’s Short-Term Outlook Hinges on Election Results
In the short term, gold remains under pressure as traders await the final election results. The ongoing uncertainty surrounding the outcome is expected to play a significant role in determining gold’s trajectory, especially ahead of the US Federal Reserve’s policy announcements on Thursday.
Market expectations are high for a 25-basis-point rate cut by the Federal Reserve, but the central bank’s future interest rate path will be closely scrutinized. Investors are keen to understand how the Fed plans to navigate potential shifts in the economy under a new presidential administration.
Technical Analysis: Key Levels to Watch
From a technical perspective, gold prices are currently grappling with the critical $2,730 support level. The 14-day Relative Strength Index (RSI) has slipped near 59, suggesting the latest decline in gold prices. However, the RSI remains above the neutral 50 level, signaling that there could be potential opportunities for dip-buying.
For gold to resume its upward trajectory, it must reclaim the $2,746 resistance on a daily closing basis. This level represents the 23.6% Fibonacci Retracement of the recent rally from the October 10 low of $2,604 to the all-time high of $2,790. A sustained move above this level could target the record high of $2,790.
Conversely, if gold fails to hold above $2,730, the next key support level is seen at $2,718, which corresponds with the 38.2% Fibonacci Retracement of the same rally. A daily close below this level could open the door for further declines toward the 50% Fibonacci level at $2,695. Additional downside pressure could lead to a test of the 61.8% Fibonacci level at $2,673.
Conclusion
With gold prices navigating through election-driven volatility, market participants will be closely watching the US election results, the Federal Reserve’s upcoming decisions, and key technical levels. As traders assess these factors, the price of gold remains vulnerable to shifts in sentiment, making it a challenging environment for investors in the near term.
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