Gold once fell by 1%, analysts: unexpected and excessive!
Gold prices fell by 1% as investors assessed the outlook for U.S. interest rates and the impact of Trump's victory. Despite the Federal Reserve's interest rate cut and Chairman Powell hinting at potential further cuts, gold prices remained under pressure from a strong rise in the dollar. Analysts believe that the post-election drop in gold prices is "unexpected and excessive," and they expect gold to gain support as a hedge against inflationary pressures
After a turbulent week of trading, investors are assessing the outlook for U.S. interest rates and the impact of Trump's victory, leading to a decline in gold prices.
According to the Zhitong Finance APP, on Friday, gold prices fell by as much as 1%. Previously, after the Federal Reserve cut interest rates by 25 basis points, gold rebounded on Thursday, despite Chairman Powell indicating that further rate cuts in December could not be ruled out. Powell also noted that recent indicators show the economy is still expanding steadily.
The gains on Thursday partially recovered the 3% drop on Wednesday, when Trump's victory triggered a strong rise in the dollar, diminishing the appeal of dollar-denominated commodities. On Friday, the dollar further strengthened against the yuan as China introduced stimulus policies.
Now, with the likelihood of a comprehensive Republican victory increasing, Wall Street economists believe that the number of Federal Reserve rate cuts may be fewer than previously expected before the election. Trump is expected to push for higher tariffs, lower taxes, and looser regulatory policies, which could exacerbate inflation.
UBS strategists, including Giovanni Staunovo, believe that gold may gain support as a hedge against inflationary pressures resulting from increased U.S. government borrowing. They consider the drop in gold prices the day after the election to be "unexpected and excessive."
So far this year, gold prices have surged by about one-third and have repeatedly hit record highs, primarily driven by escalating geopolitical and economic risks, attracting buying demand from central banks and investors. This upward trend has intensified in recent months as the Federal Reserve shifted to a rate-cutting policy and the U.S. election approached