Trump Risk... Gold Price Hits Record High Then Plummets 8% in 2 Weeks

Gold Futures at $2571 per Ounce... 5 Consecutive Trading Days of Decline
Trump Risk Behind Gold Price Drop

Gold prices, a safe-haven asset that soared to unprecedented heights earlier this year, have been declining daily due to the 'Trump risk.'

According to Investing.com on the 15th, the international gold futures price fell for the fifth consecutive trading day to $2,571.85 per ounce. Gold prices have risen 35% so far this year, but this is an 8.17% decrease compared to the record high on the 30th of last month, marking the lowest price in two months. Naeem Aslam, Chief Investment Officer at J Capital Markets, pointed out that gold prices could fall to $2,500 per ounce.

The main reason for the sharp drop in gold prices is attributed to the re-election of U.S. President Donald Trump.

First, there is a growing expectation that the Federal Reserve (Fed), which began a pivot (monetary policy shift) last September amid concerns about inflation sparked by Trump's campaign promises such as tariff increases, may slow down the pace of interest rate cuts. The yield on the sensitive 2-year U.S. Treasury note currently stands at 4.35%, up 6 basis points (1bp = 0.01 percentage points) from the previous trading day, marking the highest level in four months. Gold prices tend to rise when there is an expectation of lower interest rates.

The ultra-strong dollar, which has a strong negative correlation with gold, is also putting downward pressure on gold prices. The U.S. Dollar Index, which measures the value of the dollar against six major currencies, reached 106.87 yesterday, the highest in six months. The 'Red Sweep,' where the Republican Party controls not only the White House but also both houses of Congress, has caused the dollar to surge even more sharply.

The financial news outlet MarketWatch reported that another factor in the decline of gold prices is the possibility that President-elect Trump could end the two ongoing wars in the Middle East and Ukraine next year. It explained that if geopolitical risks decrease with Trump's return to the White House, demand for gold as a safe-haven asset would naturally decline.

MarketWatch also added that if the Government Efficiency Department (DOGE), which is expected to be established in Trump's second administration, takes various measures to reduce the federal budget deficit, this could strengthen the dollar and further depress gold prices.

The continued strength of the U.S. economy provides a basis for the possibility that gold prices may continue to decline for the time being. Sammer Haas, Chief Market Analyst at XS.com, said, “The ongoing trend of a strong labor market is likely to weaken the possibility of an interest rate cut in January next year,” and “this could justify the continued weakness of gold.” According to the U.S. Department of Labor, new unemployment claims for the week of November 3-9 fell by 4,000 from the revised previous week to 217,000, marking the lowest level since May.