Gold prices consolidate below highs as traders weigh up what a Trump presidency will mean for the markets 

• After gains of 35% since the start of the year, and 54% since the start of the rally in October 2023, a period of consolidation is unsurprising given the rapid pace of the rally
• ...it is also constructive 
• Trump’s proposed policies on trade, tariffs, and tax cuts are potentially inflationary. The market has interpreted these as bullish for the US dollar and yields, which may weigh on gold prices
• However, inflation, a larger federal deficit, and heightened geopolitical stress could also support higher gold prices. For now, the market appears to be discounting this perspective
• Geopolitical tensions have risen in the Russia/Ukraine war, but an Israel/Hezbollah ceasefire has slightly eased tension in the Middle East – the latter has seen gold prices pullback
• Funds and ETF investors have been taking profits, but there is no evidence of a significant shift toward increased bearish sentiment

Trump’s proposed policies on trade, tariffs, and tax cuts are potentially inflationary."

Bullish sentiment in silver has been dampened as Trump’s likely trade and tariff policies may damage industrial demand 

• Fund profit-taking and some increase in short selling in November have weighed on prices 

Concerns about global industrial demand have also weighed on PGM prices 

• Platinum and palladium are projected to face supply deficits this year and next. These deficits should support prices as uncertainty surrounding industrial demand diminishes
• The anticipated decline in demand for internal combustion engine vehicles due to the rise of EVs may not occur as rapidly as some have predicted, as plug-in hybrid EVs are expected to maintain a significant share of EV sales  

Platinum and palladium are projected to face supply deficits this year and next."

Gold’s rebound stalled in November, market now consolidating

Gold reached its most recent price peak of $2,790.90 per ounce on 30 October. Since then, the price has fallen to $2,536.95 per ounce, a decline of $254 (approximately 9%), before rebounding to $2,720.50 per ounce. However, the rebound stalled on 25 November, and since then, prices have been consolidating around $2,650 per ounce. Following such strong gains since late June – during which prices rose by nearly $500 per ounce – it is unsurprising that the market has paused; indeed, this can be seen as a healthy development. So far this year, prices have risen by 35.3%, despite a generally strong US dollar and rising US Treasury yields, both of which typically act as headwinds for gold demand and prices.

So far this year, prices have risen by 35.3%"

Mixed outlook for gold under Trump 

In the aftermath of the US presidential election, once it became clear that Donald Trump would be the next president, gold prices sold off. This is a typical market reaction to a Republican Party win. However, this time, Trump’s proposals for tax cuts, import tariffs, and increased federal spending are seen as inflationary, which in turn could lead to the Federal Reserve’s monetary easing spree being short-lived. This appears to be the interpretation driving the strength of US Treasury yields and the dollar. That said, one could equally argue that higher inflation, an increase in the federal deficit, escalating trade tensions, and the potential for heightened geopolitical risks could boost safe-haven demand for gold. Perhaps this will emerge as a secondary market reaction once Trump assumes the presidency again.

Headwinds and tailwinds

The stronger dollar, which has seen the US Dollar Index rise to 108 from around 100 in late September, and the rebound in US 10-year Treasury yields to 4.46% in November (up from 3.62% in mid-September), present headwinds for gold. High gold prices have also weighed on demand from jewellery buyers, coin and bar buyers, and central banks, as potential buyers are reluctant to purchase at elevated prices.

According to World Gold Council data, third-quarter year-on-year demand from these sectors fell by 9%, 9%, and 49%, respectively. However, tailwinds have come from investment, ETFs, and industrial buyers.

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09 Dec 2024 | Categories: Gold, Silver, China, US, Russia, Platinum, Palladium, UK

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