Gold prices are on track to decline for the second consecutive week, as traders assess the implications of U.S. economic policy under the presidency of Donald Trump and its potential impact on interest rates.
As of 07:43 GMT on Friday, spot gold had fallen by 0.8%, trading at $2,685.70 per ounce, marking a near 2% decrease for the week. The precious metal had already hit a three-week low on Wednesday, following the initial market reaction to Trump’s re-election victory. However, it saw a slight recovery of more than 1% the next day. U.S. gold futures also shed 0.5%, settling at $2,693.20 per ounce.
The dollar index, on the other hand, was poised for a slight weekly gain after Trump’s election win, contributing to the downward pressure on gold. A stronger U.S. dollar makes gold more expensive for foreign buyers, reducing demand for the commodity.
Traders are closely monitoring the evolving economic outlook and potential policy shifts under Trump’s continued leadership, particularly the Federal Reserve’s stance on interest rates. According to Soni Kumari, a commodity strategist at ANZ, “The gold market was waiting for a trigger to prompt some liquidation. There is uncertainty surrounding the trajectory of U.S. rate cuts, which is why we are seeing this pullback in gold prices.”
Earlier this week, the Federal Reserve cut interest rates by 25 basis points as expected, though it signaled a cautious approach moving forward. Federal Reserve Chair Jerome Powell indicated that the results of the presidential election would not have any immediate impact on the central bank’s monetary policy decisions. Market participants now see a 71% probability of another 25-basis-point rate cut in December.
Gold has traditionally been seen as a hedge against inflation, but higher interest rates increase the opportunity cost of holding the non-yielding asset. As interest rates rise, investors often shift their focus to assets that provide higher returns, such as bonds and equities.
Despite the recent pullback, some experts believe gold could see support from President Trump’s economic policies. Hugo Pascal, a precious metals trader at InProved, noted, “During Trump’s initial term in office, gold prices rallied, and we don’t expect significant changes in his policies now. A higher deficit and the imposition of tariffs are inflationary measures, which should be positive for gold.”
Investors are also keeping a close watch on developments in China. The Standing Committee of the National People’s Congress is concluding a five-day meeting later today, where any new stimulus measures or economic reforms could influence global market sentiment.
Gold’s weakness has also extended to other precious metals. Spot silver fell by 1.4%, dropping to $31.54 per ounce. Platinum declined 1.1%, trading at $986.00 per ounce, while palladium saw a 1.4% drop to $1,009.75 per ounce.
As gold faces headwinds, investors continue to navigate uncertainty in the global economy, with U.S. monetary policy and inflation concerns taking center stage.
The outlook for gold remains uncertain in the short term, as market participants assess the potential for continued rate cuts from the Federal Reserve and the broader economic environment under President Trump’s administration. While gold has experienced a pullback this week, its long-term role as a hedge against inflation may continue to support its value, especially if U.S. economic policies contribute to inflationary pressures in the coming years.
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