Gold Steadies After Trump Victory Sparks Biggest Loss Since June
Gold steadied after plunging more than 3% in the previous session, with markets weighing the outlook for the US and global economy following Donald Trump’s decisive White House victory.
Bullion traded near $2,660 an ounce following its biggest one-day fall in five months. That decline was sparked by the dollar surging to a one-year high as Trump won back the presidency in a stunning comeback, which prompted some traders to book profits as fears over a contested result eased. A stronger dollar makes the precious metal more expensive for most buyers.
“The move in the US dollar and long-end Treasury yields was too much for a market positioned heavily long” on gold, Pepperstone Group Ltd. head of research Chris Weston said in a note, adding that prices had consolidated after liquidation of some futures positions on Wednesday.
Traders are now shifting attention to the Federal Reserve’s interest-rate decision later on Thursday, where policymakers are expected to cut borrowing costs by 25 basis points. Lower rates tends to benefit bullion, which doesn’t pay interest.
Still, Wall Street economists now see fewer Fed cuts than they did before the election, because of the Trump policy mix that could see faster economic growth but also higher inflation. JPMorgan Chase & Co. still predicts a 25 basis-point easing this week and another next month, but sees the Fed slowing to a rate cut every other meeting after that.
Gold is likely to trade weakly in the very near term as US equities rally on lower tax and regulation prospects, and as machine-based selling exaggerates the downside, Citigroup Inc. analysts led by Max Layton said in a note. However, structural drivers for the metal’s bull market remain in place, they added, pointing to a deteriorating US labor market as a result of high rates.
The precious metal has surged almost 30% this year in a record-setting run that’s been powered by heightened geopolitical and economic risks, driving purchases by central banks and consumers alike. The rally intensified in the last few months as the Fed pivoted to rate cuts and the US election loomed.
Spot gold little changed at $2,658.66 an ounce as of 2:02 p.m. in Singapore. The Bloomberg Dollar Spot Index was down 0.2%, following a 1.3% gain in the previous session. Silver, platinum and palladium all declined, setting the metals on track to end the week lower.
Source : Bloomberg
