The price of gold came under pressure in the immediate aftermath of Donald Trump’s election victory, and posted its biggest weekly loss since the end of May, with a decline of around 2%, according to Commerzbank commodities analyst Carsten Fritsch.
Gold price continues to fall
“Yesterday, the price fell sharply again and continues to fall today. In the morning, gold slipped below the $2,600 per ounce level. From a record high at the end of October, gold fell around $200. The reason for the selling pressure was the significantly stronger US dollar and the sharp rise in US bond yields. Yesterday, the trade-weighted US dollar index rose to its highest level since the beginning of July. ”
“The 10-year U.S. yield also hit a four-month high the day after the election. Trump’s proposed tariffs are likely to drive up inflation, making further rate cuts by the Fed more difficult. “Our economists have raised their forecast for the bottom of key interest rates in the US by 50 basis points to 4%. This means that there should only be two more rate cuts by the Fed of 25 basis points each after the expected rate cut in December.”
“In the weeks leading up to the election, the US dollar has already risen significantly in anticipation of Trump’s victory. However, this did not prevent the price of gold from rising to new record highs. After the election, market participants seem to act according to the principle of “buy rumor, sell the truth.”
Now more gold is available to private households and accordingly, the People’s Bank of China’s gold reserves remained unchanged for the sixth consecutive month at 72.8 million ounces or 2,264 tons.
Gold maintains support at $2,600 with value search
The gold market appears to have seen some support at the crucial $2,600 level during the early hours of Tuesday morning. This is an area that has been important in the recent past and should continue to do so. For this reason, I am keeping a close eye on this market over the next few days.
Gold markets have challenged the $2,600 level, an area that is of course an important psychological figure, but also an area that has been significant many times in the past. However, I think we have a situation where buyers will continue to view gold at declines as offering value. Of course, the price of gold may have fallen slightly over the past week or so due to geopolitical problems that are starting to slow down a bit. However, I think at this point, the market will continue to see a lot of value search and possibly fear of missing out on the opportunity.
The fear of missing out on the gold market can be brutal, but we’ll have to wait and see how it goes. In any case, I don’t want to sell this market at all. Quite frankly, there are too many reasons for gold prices to rise. One such reason is that central banks will continue to lose some of their monetary policy.
So, in this case, I think we have to look at this from the perspective of a market that will continue to present opportunities every time it declines until fundamentals change. For now, fundamentals are nowhere near changing overall actions in this market anytime soon.
China needs to import less gold. China’s gold imports via Switzerland fell 13% year-on-year after nine months.
Gold ETFs see positive net inflows
Gold exchange-traded funds recorded net inflows for the sixth consecutive month in October, noted Carsten Fritsch, commodities analyst at Commerzbank.
ETFs witness net inflows for the sixth consecutive month
According to the World Gold Council, these flows amounted to 43 tons. This means that approximately 164 tons of gold have flowed into ETFs since May and for the first time this year, ETF holdings were also higher than at the end of 2023, meaning net outflows in the first four months of the year were more than reversed. One such reason is that central banks will continue to lose some of their monetary policy.
“In October, there were net inflows in North America (30 tons) and Asia (23 tons), but there were net outflows in Europe (11 tons). According to the World Gold Council, inflows in North America were due in particular to uncertainty in the run-up to the US elections. Inflows in Asia largely occurred in China, where the World Gold Council reported a record inflow for a month.”
It is also worth noting that traditional demand for gold in jewelry, bullion and coins in China has been weak recently. However, it remains unclear whether the shift in gold demand towards ETFs will continue. ETF flows in Europe have been widespread across all major markets. The World Gold Council attributes this to higher yields and weak local currencies.
People’s Bank of China keeps gold reserves unchanged
The People’s Bank of China didn’t buy any gold in October either, according to data published last Thursday, noted Carsten Fritsch, commodities analyst at Commerzbank.
