Gold Takes a Dip as Trump’s Return Shakes Markets
When news broke that former President Donald Trump is heading back to the White House, gold couldn’t help but feel a bit uneasy. Spot prices plunged past the $2,700 per ounce mark, wiping out most of the gains earned in November.
The Dollar Gets the Boot
- U.S. currency nudged up more than 1.7%, snapping back to the 105‑point range that hasn’t been seen since July.
- 10‑year Treasury yields jumped 200 basis points to 4.477%, the highest since early summer.
- The 2‑year yield was still on the rise, but only a 100‑basis‑point bump.
- Overall, the yield curve is tilting in favour of the longer‑dated Treasury, widening the spread by almost 100 basis points this year.
Inflation I‑Won’t‑Stop‑yelling
It appears investors think inflation might be on the rise again, thanks to the protectionist policies Trump promises to bring back. That means the Federal Reserve might be less giddy about cutting rates, a move that usually bolsters gold. The probability of a 25‑basis‑point rate cut in January is now just 32%, down from 69% a month ago.
What Did Trade Fears Do?
Fear of a new “Truman” era of trade wars makes the dollar look shiny. The same trade uncertainty can make people turn to safe‑havens like gold. The IMF warned in November that trade wars could stifle economic growth, particularly in the Asia‑Pacific.
Gold Finds a New Refuge in Asia
- Asia (excluding the Middle East) rips up 67% of global gold bar and coin demand.
- In China, as home prices slide, people might look toward gold for stability.
- Even if prices are volatile, a gold shot in the arm keeps the region safe‑haven vibes alive.
Behind the Scenes of Geopolitics
While Trump promises to end the wars, the reality might be far messier.
- Israeli Prime Minister Benjamin Netanyahu might expect the U.S. to play a tougher game against Iran, keeping the region tense.
- Trumps earlier remarks about ending war could clash with Netanyahu’s power‑grabbing strategy, which relies on conflict staying alive.
- In Ukraine, Trump’s love‑letter to Volodymyr Zelensky about stopping the war could be swallowed by the demand for U.S. aid cuts.
The Bottom Line
Gold’s fall is not just about numbers; it’s a tug‑of‑war between rising dollar confidence, inflation fears, and a gnawing geopolitical uncertainty. While the market looks to steadier ground, gold remains a wildcard that could swing in any direction, depending on the next chapter of U.S. politics.
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