By Ahmad Assiri

The recent dynamics in gold prices reflect a market adjustment with multiple shifts following Donald Trump’s 2024 presidential victory. The gold price move retracing from its recent highs aligns with investor recalibration in light of anticipated U.S. policy changes. Trump’s win has spurred optimism for an All-About-Growth presidency term, fueling an equities rally while simultaneously raising the U.S. dollar’s strength due to expected tariff and capital inflows.

With the Fed poised for a 25 basis point rate cut today, markets are adjusting to an easing trajectory aimed at supporting growth amidst fiscal expansion. This generally benefits non-yielding assets like gold, yet the dollar’s recent strength creates a counterbalancing pressure on gold prices. As gold tends to inversely correlate with the USD, a strong dollar could cap gold’s upside in the short term, reflecting the current pullback seen in the price action.

The higher U.S. Treasury yields, representing a clearer form of downward pressure on gold prices, add another layer of complexity. As bond yields rise, the opportunity cost of holding gold increases, discouraging flows into the precious metal and creating an additional weight on price momentum.

Gold has been well-bought over the past few weeks, perhaps as a hedge or defensive asset in light of market uncertainties; however, as the macro environment continues to evolve, this positioning may see adjustments.

Should inflationary concerns arise from Trump’s fiscal policies, or if rate cuts continue deeper into 2025, gold may re-attract buying interest, providing potential opportunities for upside in the medium term as markets digest evolving monetary and fiscal policy trajectories.

Assiri Research Strategist at Pepperstone