With Trump confirmed as U.S. president, gold has fallen over 3%, facing significant short-term pressure. However, I believe there is room for a more moderate recovery in the medium to long term.
As we saw in 2020, the post-election pullback in safe-haven demand is unfolding, with traders ‘buying the rumor, selling the fact.’
Trump’s victory has sparked expectations of policies that could favor tougher tariffs, tax cuts, and expanded fiscal spending, which could stoke reflation fears. This is evident in the recent surge of U.S. Treasury yields and the dollar index climbing above 105, diminishing gold’s appeal as a non-yielding asset.
Additionally, his push for deregulation has fueled gains in U.S. equities, drawing capital inflows that further pressure gold.
While Trump’s win is largely priced in, three key uncertainties remain that could shape gold’s future. First, Republican control of the House could accelerate Trump’s agenda, reducing policy uncertainty and potentially limiting gold’s upside by bolstering the dollar. Second, with November’s US jobs data underwhelming, another 25bp rate cut in December could provide modest support for gold.
Finally, China’s ongoing National People’s Congress session is one to watch. As one of the largest gold buyers, any aggressive stimulus measures or yuan devaluation from China could strengthen gold’s long-term appeal.
