Gold came under heavy bearish pressure and dropped toward $2,700 as markets reacted to Donald Trump’s victory in the presidential election. Although gold managed to erase a portion of its losses before the European session, it remains deep in negative territory, pressured by a 4% rise in the 10-year US yield. The dollar also appreciated by 1.5%.
The uncertainty surrounding the election up until the end was a driver of safety flows into gold, which was partly responsible for keeping its price close to record highs last week. However, now that the result is confirmed, could they be diminishing?
Donald Trump also mentioned he that he intends to end the wars in Ukraine and the Middle East which could also be a factor in gold potential retreat.
Deficit-spending concerns and bets for a less aggressive easing by the Federal Reserve continue to push the US Treasury bond yields and the USD higher, which further contributes to driving flows away from gold.
Financial markets anticipate a 25-bps rate cut from the Fed in its upcoming meeting today, which could put pressure on prices. Gold surged significantly after the Fed’s previous 50-bps rate cut, so traders are watching closely to see how this next adjustment might impact the market.
But strong economic data which led to a higher dollar changed the Fed’s view on the economy that a smaller rate cut size is preferable.
Technical Analysis
Source: TradingView
Gold hit a new high of $2,790 on October 31 but struggled to maintain its upward momentum as bullish energy faded.
Gold prices then dropped to the pivot line, now acting as support at $2,713, after breaking out of its previous range. Currently, gold appears to be in a short-term downtrend, signaling a potential pullback, though the long-term uptrend could face additional short-term pressure. The RSI indicates that gold is overbought and has also formed a bearish divergence, supporting the near-term bearish outlook.
If the price manages to rebound from the pivot line, there’s a chance it could surpass its previous high, forming resistance around $2,820. Buyers may attempt to push prices higher toward a potential double-bottom pattern with the October 23 low. Conversely, if bearish pressure persists, we may see gold decline to around $2,635, where a support line could emerge and potentially shift the trend’s direction.
