Global gold prices reached their lowest levels in more than three weeks on Thursday as the U.S. dollar index surged after Donald Trump’s win in the U.S. presidential election. Market focus shifts today to the Federal Reserve’s decision on interest rates.
In the UAE, gold rates fell AED7 with 24-carat gold declining to AED322.75 while 22-carat gold declined AED6.5 to AED298.75. In addition, 21-carat gold declined AED6.25 to AED289.25, and 18-carat gold dipped AED5.25 to AED248.
Globally, spot gold edged down 0.41 percent to $2,656.77 per ounce, as of 6:12 GMT, while December gold futures fell 0.57 percent to $2,661.10 per ounce.
Gold prices hit an all-time high of $2,790.15 last week and have lost more than $130 since then.
Dollar surges on Trump win
The U.S. dollar index hovered near a four-month high, making gold prices more expensive for other currency holders. Former president Republican Donald Trump won the 2024 U.S. Presidential elections with a sweeping victory yesterday. Treasury yields also jumped amid expectations that a second Trump administration will likely roll out policies including tariffs that may boost inflation.
The Republicans have also taken a majority in the Senate, the upper chamber of the U.S. Congress, and were on track to win the House of Representatives, raising the possibility of a Republican sweep in the 2024 elections. This would give Trump an easier path to enact major policy changes, many of which markets see as inflationary. Such a scenario will likely keep interest rates higher in the long term, helping the dollar.
Investors around the world exhibited a strong appetite for gold last month as prices surged to record highs. The number of first-time gold buyers around the world doubled from its 12-month average – rising a whopping 104.2 percent. On a month-over-month basis, first-time gold buyers around the globe surged 49.4 percent in October, led by the UK, France, Germany, and Italy.
However, first-time buyers of bullion in America declined month-over-month in October, ahead of the election. Vijay Valecha, chief investment officer at Century Financial, says that this could be an indication of political polarization.
Fed rate cut
Trump’s victory also fueled questions about whether the Federal Reserve may proceed to cut rates at a slower and smaller pace.
Traders are anticipating a 25-basis-point cut likely to be announced at the end of the Fed’s meeting later in the day, with focus also being on chair Powell’s statement for any guidance on the central bank’s rate-cut path.
According to the CME FedWatch tool, markets see a 97.5 percent chance of a 25-basis-point cut today, which would be the second U.S. rate reduction of the year.
Trump’s potential policy is inflationary, which could translate to slower rate cuts. Higher interest rates impact the appeal of gold but a widening U.S. budget deficit and reduced fiscal discipline will be positive for bullion prices. Gold is traditionally a hedge against geopolitical and economic uncertainties. However, higher rates raise the opportunity cost of holding zero-yield bullion.
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Other precious metals
Amid the decline in gold prices, the precious metals market saw negative momentum with spot silver falling 0.11 percent to $31.13 per ounce and platinum declining 0.52 percent to $981.55. Meanwhile, palladium slipped 0.89 percent to $1,025.83. All three metals were down for the second straight session.
Among industrial metals, copper prices fell sharply as Trump signaled more economic pressure on China, the world’s biggest copper importer. Following his election, copper recovered, rising 0.33 percent to $4.24. Trump has vowed to impose steep trade tariffs on China, signaling more economic pressure on the country as it grapples with persistent deflation and a prolonged property market downturn.
China’s National People’s Congress is meeting this week and traders are looking for more cues on Beijing’s plans for fiscal stimulus.
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