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The gold market is experiencing a moment of hesitation today, with spot gold prices hovering around $2,663.02 per ounce as of early trading. This stabilisation follows last week’s record high of $2,790.15, a level that has since seen a steep fall, with gold losing nearly $130.
See: XAUUSD shows a bearish trend, dropping from 2749.97 to 2653.66 with bearish signals from MA and MACD on the VT Markets app.
The primary driver for this pause in gold’s rally appears to be a strengthened U.S. dollar, which reached a four-month high after Donald Trump’s successful return to the presidency, defeating Vice President Kamala Harris. This dollar boost makes gold more costly for overseas buyers, dampening demand.
U.S. gold futures also took a slight dip of 0.2% to $2,670.40, indicating mild pressure across gold instruments as the dollar’s momentum holds.
Traders quickly shifted into the dollar on the heels of Trump’s victory, likely viewing his win as a harbinger for economic policies focused on growth and inflation containment. With Trump’s administration set to focus on economic stimulus, traders speculate that the Federal Reserve may moderate its rate-cut trajectory.
The anticipated 25-basis-point cut, expected at the end of the Fed’s two-day meeting, has taken centre stage. This cut could potentially be one of the last in the near term, depending on how quickly Trump’s policies start affecting economic growth and inflation.
Additionally, traders will closely monitor Fed Chair Jerome Powell’s remarks, as any hint towards a slower rate-cut path could further fuel dollar strength, adding downward pressure on gold.
As a traditional safe-haven asset, gold thrives in low-interest-rate conditions, which decrease the opportunity cost of holding non-yielding metals. The uncertainty around future rate cuts, however, presents a mixed outlook.
If Powell signals a conservative stance on future cuts, the dollar could gain further traction, with potentially bearish implications for gold in the short term.
Metals across the board experienced variable impacts. Spot silver saw a modest increase of 0.2% to $31.21 per ounce, while platinum gained 0.13% to $987.90. Palladium, however, declined by 0.2% to $1,032.93, as the markets await further policy clarity.
Meanwhile, other commodities such as oil and gas have begun recouping losses, suggesting that Trump’s pro-energy policies could reinforce demand in these sectors.
See also: USDX Hits Four-Year High as Trump Re-Elected
With market participants awaiting more direction, today’s Fed decision will be a critical indicator. If dollar strength persists, gold prices may struggle to regain last week’s highs in the near term.
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