After declaring victory, Donald Trump pledged that his second administration would usher in a "new golden age for America."
While his celebratory speech focused on domestic policies, Mr Trump also said the country needed "a strong and powerful military but ideally we don't have to use our military".
The dollar has been on a tear, while gold has been selling off sharply following the announcement of Donald Trump’s victory, according to Kitco. Not only that, the precious metal is facing a key test of support as the US Federal Reserve’s interest rate decision on Thursday adds to downside risks, according to analyst James Hyerczyk at FX Empire.
“Gold prices fell sharply as traders booked profits amid a stronger dollar and a surge in US Treasury yields following Donald Trump’s expected return to the White House,” said Hyerczyk.
The sell-off in gold pushed prices below key technical support at $2,708.76 an ounce, changing the trend and continuing to pressure the metal by breaking below $2,697.28 an ounce.”
Gold is now facing a key test near its 50-day moving average of $2,636.66 an ounce as markets await the Fed's policy announcement on Thursday, the expert said.
Investors are now expecting a renewed focus on tariffs and fiscal stimulus from the Donald Trump administration, both of which could push the dollar higher.
“Analysts like Paul Christopher of Wells Fargo note that potential trade tariffs could boost domestic business activity, which could strengthen the USD/ounce, putting further pressure on gold prices.
Treasury yields also spiked on Wednesday as the bond market reacted strongly to the U.S. presidential election. Rising yields reduce the appeal of gold," Hyerczyk wrote.
Hyerczyk also believes that the spike in Treasury yields and the Fed's rate statement also pose greater risks to gold. "While the market is expecting a 25 basis point rate cut, any indication of a pause or slowdown in Fed rate cuts would put further pressure on gold, which is already sensitive to rising interest rates and a stronger dollar," he said.
On the technical picture, Hyerczyk said the outlook for gold is currently bearish. Gold is tilted to the downside.
“With a stronger dollar and rising yields, gold faces immediate downside risks. The precious metal could fall to its 50-day moving average of $2,636.66 an ounce if the Fed signals more caution about future rate cuts. If yields continue to rise and the dollar remains strong, gold may struggle to recover to recent support levels, leading to the potential for further downside in the coming days,” Hyerczyk wrote.
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