Gold prices fell to their lowest level in more than three weeks on Thursday, as a stronger US dollar, bolstered by Donald Trump’s victory in the US presidential election, weighed on the precious metal. The market was also awaiting the Federal Reserve’s interest rate decision, which is set to be announced later in the day.
At 3:27 AM GMT, spot gold was down by 0.1%, trading at $2,656.34 per ounce. Earlier in the session, it had touched its lowest point since October 15. Gold had reached a record high of $2,790.15 per ounce last week, but has since lost more than $130.
Meanwhile, US gold futures dropped 0.5%, settling at $2,663.60 per ounce.
The dollar index, which tracks the greenback’s performance against a basket of other currencies, remained near a four-month high, making gold more expensive for buyers holding other currencies.
Trump’s resounding victory in the presidential election on Wednesday raised concerns over the Federal Reserve’s future rate-cut strategy. Analysts are predicting a 25 basis-point reduction in interest rates at the conclusion of the Fed‘s meeting later today. However, attention will be focused on Federal Reserve Chair Jerome Powell’s comments for any clues about the central bank’s approach to future rate cuts.
Some analysts believe that Trump’s policies, particularly those with inflationary implications, may lead the Fed to reduce rates at a slower pace. This potential slowdown in rate cuts is viewed as a negative for gold, although a growing US budget deficit and weakened fiscal discipline could benefit the precious metal, according to Kelvin Wong, a senior market analyst at OANDA in Asia Pacific.
Gold is typically seen as a hedge against geopolitical and economic uncertainty, but higher interest rates increase the opportunity cost of holding gold, which offers no yield.
Peter Fung, head of dealing at Wing Fung Precious Metals, maintained an optimistic outlook for gold. “I still think gold’s path remains bullish as people would like to buy it as a safe haven to shield against risks. I expect prices to hit $3,000 next year,” he said.
In addition to gold, other precious metals also saw declines. Spot silver fell by 0.4%, trading at $31.03 per ounce, while platinum dipped 0.3% to $983.73, and palladium slid 0.7% to $1,028.25. All three metals have now declined for two consecutive sessions.
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