Gold Prices Dip Following Trump’s Return to White House

Gold, which has soared for much of 2024, experienced a sharp decline after Donald Trump’s presidential election victory. The precious metal dropped over 4% in the four days since Election Day, trading at $2,618 per ounce on Monday, down from its record high of $2,800 late last month.

Reasons for the Decline

The decline in gold prices comes despite expectations that Trump’s policies—lower taxes and higher tariffs—could increase government debt and inflation, factors that traditionally boost gold’s value. Several elements have contributed to gold’s recent dip:

1. Strengthening U.S. Dollar:
   The U.S. dollar has gained strength against major currencies, partly due to anticipated trade wars and tariffs. A stronger dollar makes gold more expensive for international buyers using other currencies, reducing demand.
2. Reduced Expectations for Interest Rate Cuts:
   Wall Street has adjusted its outlook for Federal Reserve interest rate cuts next year. Fewer cuts would increase Treasury bond yields, making gold less attractive since it offers no interest or dividends.
3. Shifting Investor Sentiment:
   As U.S. stocks rallied nearly 4% post-election, some investors shifted from gold to equities, further contributing to the dip.

Gold’s Enduring Appeal

Despite the recent drop, gold remains a favored asset for investors seeking stability amid global uncertainty. Ongoing geopolitical tensions, including wars in the Middle East and Ukraine, continue to reinforce gold’s status as a “safe haven” investment.

“Gold continues to be the safe haven asset class of choice for both investors and central banks,” noted money managers at Robeco.

Performance in 2024

Gold has been one of the best-performing investments of the year, with a gain of nearly 27%, though down from its peak of 35% earlier in the year. Exchange-traded funds (ETFs) tracking gold have mirrored this trend.

While gold’s luster may have dimmed temporarily, its role as a hedge against global instability ensures it will remain a vital component of investor portfolios.