- Gold bases on Thursday after experiencing a 3.0% fall on Wednesday following the news of Donald Trump’s victory in the presidential race.
- A stronger US Dollar, capital pivoting into riskier assets, and potential unwinding of geopolitical risks were all bearish drivers.
- Technically, XAU/USD extends its short-term downtrend although the RSI momentum indicator is oversold.
Gold (XAU/USD) steadies in the $2,660s on Thursday after falling three percent on the previous day when now President-elect Donald Trump secured a victory in the US presidential election.
Gold falls 3.0% as Donald Trump wins election
Gold's steep decline on Wednesday was partly a result of the US Dollar (USD) strengthening due to Trump’s Dollar-positive economic agenda and preference for pro-tariff protectionism. Since Gold is mainly priced and traded in USD, the stronger Dollar had an immediate negative impact on its price.
Trump won the presidency by passing the 270 electoral votes threshold. On Thursday, Trump has 295 votes to Harris’ 226, according to the Associated Press. The Republican party also has a majority in the United States (US) Senate – 52 over 44 – and is in the lead to win a majority in the US Congress, with 206 seats versus the Democrat’s 191 so far, although 38 have still to be called.
The precious metal may have been further hit by investors’ preference for alternative, riskier assets, such as Bitcoin (BTC), which hit a new all-time high due to expectations that Trump would relax crypto regulation. Stocks also rose to record heights due to anticipated tax cuts and a looser regulatory environment overall. These all came at the cost of Gold, which saw outflows as investors rebalanced portfolios.
Gold also rises during geopolitical crises and wars from increased safe-haven demand. Trump’s claims that he can end the conflicts in the Middle East and Ukraine, though seemingly exaggerated (“I will have that (Ukraine-Russia) war settled in one day – 24hrs,” Trump said once), however, probably also hit safe-haven flows.
Technical Analysis: XAU/USD enters short-term downtrend
Gold shatters the glass of $2,700 and falls to the mid $2,650s on Thursday. The precious metal is now in a short-term downtrend and, given the principle that “the trend is your friend,” it is vulnerable to further weakness in the near term.
XAU/USD 4-hour Chart
That said, the Relative Strength Index (RSI) momentum indicator has entered deep into oversold territory, indicating short-holders should not add to their positions. If the RSI exits oversold, sellers are advised to close their trades and open tentative longs, as it will be a signal that the price will probably correct higher.
Due to the bearish short-term trend, a break below the $2,643 daily low would confirm a continuation, probably to the next downside target at $2,605, the trendline for the long-term trend.
The precious metal remains in an uptrend on a medium and long-term basis, with a material risk of a reversal higher in line with these broader up cycles. At the moment, however, there are no technical signs of this happening.
A break above the all-time high of $2,790 would re-confirm the medium-term uptrend and probably lead to a move up to resistance at $2,800 (whole number and psychological number), followed by $2,850.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
Pound Sterling edges higher after BoE rate cut, focus shifts to Governor Bailey – LIVE
The Bank of England (BoE) lowered the policy rate by 25 basis points to 4.75% following the November meeting, as expected, and said that the budget is forecast to boost inflation. BoE Governor Bailey will speak on the policy outlook in a press conference next.
EUR/USD clings to gains above 1.0750 amid US Dollar pullback
EUR/USD holds higher ground and trades above 1.0750 on Thursday. The pair finds support from a broad US Dollar retreat, as traders unwind their Trump win-inspired USD longs ahead of the Federal Reserve's highly-anticipated policy announcements.
Gold recovers above $2,660, awaits Fed rate decision
Gold recovers slightly following Wednesday's sharp decline and trades above $2,660. The benchmark 10-year US Treasury bond yield struggles to push higher after Trump-inspired upsurge, allowing XAU/USD to hold its ground ahead of the Fed policy decisions.
Federal Reserve expected to deliver 25 bps interest-rate cut, shrugging off Trump victory
The Federal Reserve is widely expected to lower the policy rate after Donald Trump won the US presidential election. Fed Chairman Powell’s remarks could provide important clues about the rate outlook.
Outlook for the markets under Trump 2.0
On November 5, the United States held presidential elections. Republican and former president Donald Trump won the elections surprisingly clearly. The Electoral College, which in fact elects the president, will meet on December 17, while the inauguration is scheduled for January 20, 2025.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.