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Gold Prices Struggle Amid Trump’s Victory And Dollar Rally

by Barbara Miller

Gold prices continued to slide in Asian trade on Thursday, extending steep losses from the previous day’s sharp decline. The precious metal’s downturn followed the news of Donald Trump’s victory in the 2024 U.S. presidential election, which ignited a surge in the dollar and risk-on assets, putting pressure on safe-haven investments like gold.

While the yellow metal faced a significant setback, it retained much of the strong gains it had accumulated over the past month. However, a substantial correction and profit-taking activity were to blame for the drop, as investors cashed in after gold hit record highs ahead of the election.

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Gold Prices Drop Amid Dollar Rally Post-Trump Win

In early Thursday trading, spot gold prices fell to $2,658.03 an ounce, while December gold futures dipped by 0.4% to $2,664.70 an ounce at 23:37 ET (04:37 GMT). This drop followed a dramatic 3% plunge on Wednesday, triggered by Trump’s election victory, which sent the U.S. dollar soaring to four-month highs.

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The conclusion of a highly contentious election, along with the certainty of Trump’s return to the White House, eased market anxieties. This newfound clarity fueled a global risk-on rally, shifting investor focus away from safe-haven assets like gold to higher-risk investments. The strength of the dollar and the growing appetite for riskier assets added further downward pressure on gold prices.

Profit-Taking and Profit-Clearing Pressures Gold

Gold had been on a significant upward trajectory in the months leading up to the U.S. election, reaching a series of record highs. However, the market saw a sharp reversal as investors began to lock in profits following the election results. This wave of profit-taking compounded the pressure on the metal, contributing to the substantial declines witnessed in the immediate aftermath of Trump’s victory.

Despite the recent losses, gold managed to hold on to a significant portion of its gains from the previous month, thanks to its resilience amid ongoing global uncertainties. Traders and investors alike kept an eye on the potential for further movements in the market as the dust settled after the election.

Dollar Strength Weighs on Gold’s Appeal

The primary factor driving gold’s recent struggles is the rally in the U.S. dollar. As a non-yielding asset, gold tends to underperform when the dollar strengthens, as investors turn to higher-yielding assets. Trump’s victory reignited concerns about inflationary policies and trade tariffs, particularly with China. Such policies could further pressure the value of gold, particularly if inflationary pressures continue to mount during his term.

Trump’s promise to increase trade tariffs on China has the potential to spark a renewed trade war between the world’s two largest economies. This could introduce additional market uncertainty, keeping both the dollar and risk assets buoyed, while continuing to weigh on the appeal of safe-haven investments like gold.

Market Focus Turns to Federal Reserve Meeting

While gold prices were under pressure, attention turned to the Federal Reserve’s upcoming meeting later in the day, where the central bank was widely expected to implement a 25-basis-point interest rate cut. However, market participants remained uneasy over the Fed’s future policy direction, particularly given the persistent inflationary concerns and the shifting political landscape under a Trump presidency.

The markets were particularly cautious about what signals the Fed would provide regarding its future policy stance. As the economic landscape evolves, investors remain uncertain about whether the central bank will prioritize inflation control or consider further interest rate cuts to support economic growth. Such decisions could have significant implications for the outlook of gold and other precious metals.

Other Precious Metals Also Struggle

Gold was not the only precious metal to face losses on Thursday. Platinum futures fell 0.6% to $988.40 an ounce, while silver futures dropped 0.9% to $31.035 an ounce. Both platinum and silver have experienced considerable declines in recent trading sessions, mirroring the trends seen in gold. As with gold, the rally in the U.S. dollar and the shift towards risk assets took a toll on these metals, dampening their appeal as safe-haven investments.

Despite these short-term setbacks, precious metals still maintain a degree of appeal due to their historical role as hedges against economic and geopolitical uncertainty. As market conditions remain volatile, these metals continue to be monitored for potential recovery opportunities.

Copper Prices See Upward Momentum as China Imports Steady

In contrast to the struggles faced by precious metals, copper prices rose on Thursday, recovering some of the recent losses after data from China showed steady imports of copper. Copper prices had fallen sharply on Wednesday, with concerns about a potential slowdown in demand from China weighing on the metal. However, Thursday’s data showed that China’s imports of unwrought copper and copper products remained robust in October, offering some reassurance to the market.

Benchmark copper futures on the London Metal Exchange (LME) rose by 1.3% to $9,444.50 per ton, while December copper futures climbed 1.4% to $4.2980 per pound. These gains marked a partial recovery after copper prices slid by as much as 5% on Wednesday, as fears grew over potential economic headwinds for China under a Trump presidency.

China’s Copper Imports Remain Steady

China, the world’s largest copper importer, has long been a key player in driving demand for copper. Despite fears of an economic slowdown in the country due to the shifting political landscape and potential trade tensions under Trump’s administration, China’s copper imports showed a slight year-on-year increase.

According to the latest data, China imported 506,000 metric tons of unwrought copper and copper products in October, reflecting a 1.1% increase compared to the same period last year. This data helped calm some market concerns, indicating that demand from China for copper remains steady, at least for now.

Concerns About China’s Copper Demand Persist

While the recent data on copper imports is reassuring, concerns about China’s long-term demand for the metal remain. Copper is heavily tied to industrial activity, and any slowdown in China’s manufacturing sector or infrastructure development could dampen demand for the metal. Furthermore, the uncertainty surrounding U.S.-China trade relations under Trump’s administration has added an additional layer of risk for copper markets.

As the largest global consumer of copper, China’s economic health remains a critical factor in determining the metal’s price trajectory. Traders and investors will be closely monitoring any developments in China’s economic performance, as well as the potential impact of a Trump presidency on trade relations, to gauge the future outlook for copper prices.

Conclusion: A Volatile Period for Precious and Industrial Metals

The sharp decline in gold prices following Trump’s election victory highlights the sensitivity of precious metals to shifts in the political and economic landscape. As the U.S. dollar strengthens and risk-on sentiment rises, gold and other safe-haven assets have struggled to maintain their gains. Despite this, many of these metals continue to retain some support, especially as uncertainties around trade policy and inflation persist.

Meanwhile, industrial metals such as copper have seen some positive momentum, aided by steady imports from China. However, lingering concerns about global economic growth and geopolitical tensions remain a key risk for these markets.

As markets continue to react to the unfolding political and economic developments under a Trump presidency, investors will need to remain vigilant and prepared for further volatility in both precious and industrial metals markets.

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