After enjoying a historic run in 2024, gold prices are retracing as markets digest Donald Trump’s return to the White House.
During the multi-month rally, gold set its sights on breaching the $3,000 resistance level, but current downward pressure has pushed the precious metal to test the $2,600 support.
As of press time, the yellow metal was valued at $2,653.96, reflecting a loss of 3.3% over the past 24 hours. Gold is down almost 5% on the weekly chart, marking its lowest price level in three weeks. Despite these losses, gold remains in the green for 2024, up 28.64%.
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Why gold price is retracing
Interestingly, gold is plunging as the equities and cryptocurrency markets react positively to Trump’s election.
Several factors are driving gold’s drop, with the surging dollar topping the list. The currency has hit a four-month high, and a stronger dollar typically makes gold more expensive for buyers holding other currencies, reducing demand.
At the same time, gold investors are also focused on the upcoming Federal Reserve monetary policy meeting. The meeting will likely provide clues about the pace of future rate cuts.
If the Fed signals a more cautious stance or delays cuts, it could reduce the appeal of gold, further contributing to its recent decline.
Meanwhile, there appears to be some uncertainty stemming from Trump’s election. There is speculation that his administration might introduce policies, such as higher tariffs, that could keep interest rates elevated for longer.
Before the election, there was a projection that gold might rise amid potential political uncertainty. Trump had hinted that if the election went against him, it would be “rigged,” which led to uncertainty among investors.
With his win, there now seems to be an expectation of political stability. Gold has a long-standing reputation as a safe-haven asset during political instability and inflation.
What next for gold
Looking at the next price movement, Ole Hansen, head of commodity strategy at Saxo Bank, noted on November 6 that gold’s correction is accelerating.
Hansen observed that the key uptrend that began in September has now broken, with gold dropping below the significant $2,685 level.
To this end, the analyst set the next target at $2,600, which aligns with the 0.382 Fibonacci retracement of the June-November rally and marks October’s low.
Failing to hold above $2,600 could lead to further declines, with traders eyeing additional retracement levels. Meanwhile, a Finbold report indicated that post-election resistance levels to watch for gold are $2,745 and $2,758.
Hansen also highlighted the precarious position gold finds itself in while navigating key fundamentals.
“Gold will be torn between the risk of rising inflation, potentially slowing the pace of US rate cuts, as tariffs are rolled out and continued demand for safe-haven assets,” said Hansen.
It’s worth noting that gold has performed well under both Republican and Democratic administrations, rising by 54% during Trump’s first term and 50% so far under President Joe Biden.
To this end, gold price analyst Garrett Goggin stated that the metal could reach a new all-time high of $4,500 by the end of Trump’s second administration.
Although gold is correcting, most market players believe the asset is likely to target $3,000, a level expected to be in play by 2025. Despite the new administration, inflation and geopolitical tensions in the Middle East remain lingering catalysts for gold.
Featured image via Shutterstock
