Gold prices slump as dollar, Treasury yields, surge on Trump election victory

Investing.com--Gold prices fell sharply Wednesday, pressured by a spike in the dollar and Treasury yields after victory for Donald Trump in the 2024 presidential election. 

At 3.59 p.m. ET (205805 GMT), spot gold fell 3% to $2,661.05 an ounce, while gold futures expiring in December fell nearly 3% to $2,669.50 an ounce.  Dollar surges as Trump wins election

Gold prices were pressured by a stronger dollar , with the greenback climbing to a near four-month high, underpinned by rising Treasury yields after Trump was elected as the 47th president of the United States, returning to the White House for a second four-year term. 

Treasury yields jumped amid expectations that a second Trump administration will likely roll out policies including tariffs that may boost inflation, forcing the Fed into a slower pace of rate cuts.

The Republicans have also taken a majority in the Senate, the upper chamber of the US Congress, and were on track to win the House of Representatives, raising the possibility of a Republican sweep in the 2024 elections.

This would present an easier path for Trump to enact major policy changes, many of which are seen as inflationary. Such a scenario is expected to keep interest rates relatively higher in the long-term, helping the greenback.

A stronger U.S. dollar makes greenback-denominated commodities, such as gold, more expensive for holders of other currencies.

Other precious metals were broadly negative on Wednesday, with platinum futures down 1% to $995.40 an ounce, while silver futures fell 4.5% to $31.302 an ounce. Falling real interest rates could spur gold gains - Bernstein 

Still, despite Wednesday's losses, the yellow metal remained close to recent record highs.

And gold could potentially reach $3,400 per ounce if U.S. real interest rates drop to zero, said analysts at Bernstein, in a note, driven by fiscal policies that could weaken the U.S. dollar.

"Gold has an established negative relationship with [the] U.S. dollar and real rates," Bernstein notes, as gold typically gains value when fiat currency, such as the dollar, loses strength.

The path to $3,400 per ounce would likely involve a "red sweep or a blue sweep," which Bernstein views as increasing U.S. fiscal deficits and debt, putting downward pressure on real rates. Copper slides as Trump's win spurs China jitters 

Among industrial metals, copper prices fell sharply as Trump's presented the likelihood of more economic pressure on China, the world’s biggest copper importer.

Benchmark copper futures on the London Metal Exchange fell 4.2% to $9,324.00 a ton, while December copper futures fell 5.3% to $4.2375 a pound.

Trump has vowed to impose steep trade tariffs on China, heralding more economic pressure on the country as it grapples with persistent deflation and a prolonged property market downturn. 

There is a meeting of China’s National People’s Congress this week, and traders are looking for more cues on Beijing’s plans for fiscal stimulus.

Additionally, the US Federal Reserve concludes its latest policy-setting meeting on Thursday, and the central bank is widely expected to cut interest rates by 25 basis points . 

(Ambar Warrick contributed to this article.)

Source: Investing.com