The dollar hit four-month highs, making bullion more expensive for buyers who have other currencies, in the markets’ first reaction after the Republican’s victory.
The gold prices they touched almost three week lows on Wednesday, while the dollar remained strong and “Trump trades” soared, while investors closely watched the Federal Reserve’s next monetary policy meeting.
Spot gold fell 0.8% to $2,721.21 an ounce at 0923 GMT. The bullion hit an all-time high of $2,790.15 last Thursday. US gold futures were down 0.7% at $2,730.20.
The Republican donald trump claimed victory in the 2024 presidential race after Fox News projected that he had defeated Democrat Kamala Harris, capping an impressive political comeback four years after he left the White House. The dollar hit four-month highs, making bullion more expensive for buyers holding other currencies.
“Gold breaks lower, weighed down by continued dollar strength and risks that the Fed could slow its pace of rate cuts amid concerns that inflation could reignite,” said Ole Hansen, chief of Saxo Bank’s commodities strategy.
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Why gold falls
Gold is considered a hedge against inflation, but higher interest rates reduce the appeal of bullion, which does not yield interest. The Federal Reserve’s two-day policy meeting ends on Thursday and markets generally expect the Fed to announce a quarter-point rate cut following September’s 50 basis point cut.
“If another rate cut is hinted at in December, gold prices could hold steady and potentially rise. Essentially, what is said about December will probably matter more than this week’s rate decision,” said Zain Vawda, market analyst at MarketPulse by OANDA. In the physical market, the Perth Mint reported a decline in gold sales in October, while silver fell to its lowest level in four months.
Among other precious metals, spot silver fell 1.4% to $32.19 an ounce. Platinum fell 1.2% to $987.43 and palladium fell 1.4% to $1,060.94. All three metals hit their lowest levels in three weeks.
Source: Ambito
