Gold Prices Decline Amid Strong Dollar

Investing.com – Gold prices decreased in European trading on Tuesday as the dollar strengthened significantly due to speculation around the incoming Donald Trump administration's policies.

Improved risk appetite following Trump's election victory last week diminished gold's safe-haven appeal, leading to a sharp rally in the dollar and putting pressure on bullion prices.

• Spot gold fell by 0.9% to $2,595.56 per ounce.
• Gold futures for December dropped by 0.6% to $2,601.55 per ounce as of 06:52 ET (11:52 GMT).

Spot gold prices have decreased from record highs nearing $2,800 per ounce over the last two weeks. Sentiment around gold has been adversely affected by a surge in the dollar, attributed to expectations that Trump's inflationary policies will keep interest rates elevated over the long term.

Economists suggest that Trump’s protectionist trade stance, including a blanket tariff on US imports, could potentially revive inflationary pressures that have recently declined.

The dollar reached four-month highs this week, with Treasury yields—typically inversely correlated to prices—also rising.

Investors are focusing on important US consumer price data, expected to show persistent inflation in October. Additionally, a series of Federal Reserve officials are slated to speak in the coming days, providing further insights on interest rates after the central bank's recent 25 basis point cut in borrowing costs.

Traders are pricing in a 66.7% chance of another quarter-point cut in December, while a 33.3% chance exists that rates will stay the same, according to the CME FedWatch Tool.

Analysts at JPMorgan Chase noted, "The swift move lower in gold post-election ran counter to our strategists’ expectations, however, they believe this sell-off is more a hiccup than a major shift. Furthermore, it was predominantly driven by short-term position adjustments pre-election rather than a break in the theory that a Republican sweep will likely encourage further gold price increases in 2025 as the debasement trade continues."