Gold drops 3% as Trump's victory triggers USD rally
Gold futures fell sharply following Trump's election win as the market anticipates higher US interest rates, boosting dollar demand and detracting from gold as a safe-haven asset.
Key points
- Gold futures drop over $50 after Trump's election victory
- Anticipation of higher US rates boosts dollar, weakens gold's appeal
- US Treasury yields rise as bond prices fall, reflecting market shift
- Dollar index climbs to 104.8, strongest in 4 months post-election
- Fed may reconsider rate cuts amid economic policy changes
Gold Prices Crushed Following Trump US Election Win
Gold futures plummeted by over $50 on Wednesday morning after Donald Trump's victory in the US presidential election. Traditionally, gold acts as a hedge against inflation, which soared to historic highs during the recent Democratic presidency. However, the anticipation of higher US interest rates has spiked demand for the US dollar, leaving gold—which is often viewed as an alternative safe-haven asset to the USD—struggling to attract buyers.
US Interest Rates Jump as 10YR Yield Closes in on 4.5%
Following Donald Trump's victory in the US presidential election, there was a notable decline in US Treasury note and bond prices, leading to an increase in yields. This shift reflects a market recalibration, as prior to the election, investors had anticipated a trajectory of lower interest rates and further rate cuts from the Federal Reserve, driven by economic uncertainties and slower growth expectations. Trump's win altered these expectations, bringing a renewed focus on potential fiscal stimulus and economic policies that could lead to stronger growth and inflation pressures. As a result, yields on US government securities rose as investors adjusted their outlooks, anticipating a possible reversal in the Fed's dovish stance. This rise in yields is closely tied to the strengthening of the US dollar, as higher interest rates tend to attract foreign investment, seeking better returns than those available in lower-yielding environments. The relationship between treasury yields and the dollar underscores a broader shift in market sentiment, reflecting confidence in the US economy's potential under Trump's proposed policies.
USD Up to Highest Gains in 4 Months as Trump Claims Election Victory
Following Donald Trump's victory in the US presidential election, the dollar index surged to around 104.8, marking significant gains attributed to the election's clarity. Trump's focus on trade tariffs has fortified the dollar against many other currencies, but the control of Congress remains pivotal for potential fiscal shifts in spending and taxes. Meanwhile, the Federal Reserve is expected to cut interest rates by 25 basis points on Thursday, with another similar reduction anticipated in December. This forecast could weaken the dollar, as interest rate declines usually diminish a currency's attractiveness, potentially leading to depreciation unless economic conditions improve, or fiscal policies remain stable. However, there is possibility of this decision being reversed due to the potential hawkish reversal of the Fed.
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