Gold’s Shine Fades as Strong Dollar Takes Center Stage

Gold recently hit an all-time high but has since declined to an eight-week low as market dynamics shift. The strengthening US dollar, spurred by Trump’s re-election and persistent global tensions, has redirected investor interest to the dollar as a primary safe-haven asset, impacting Gold’s position in the market.

Since Donald Trump’s election victory, Gold has decreased to $2,618 per ounce from a record high of around $2,800, marking a decline of over 7%. This decline comes as the US dollar strengthens, making Gold more expensive for international buyers and as investors adjust expectations for fewer interest rate cuts. Despite the drop, Gold remains a preferred safe-haven asset amid ongoing global tensions, with its reputation intact as a hedge against political and economic uncertainty.

The US dollar’s strength is currently pressuring Gold, as investors are favoring the dollar over precious metals. While Gold is expected to regain its appeal eventually, further downside is likely in the near term due to continued dollar momentum. Oil prices are also anticipated to stay soft, driven by high production levels and low demand, especially from China. Copper, with long-term potential in the EV market, remains influenced by dollar strength and global economic activity.

Gold prices declined for the sixth consecutive session on Thursday, pressured by a stronger dollar and higher bond yields following October’s US inflation data, which met expectations. Spot gold dropped 1.43% to $2,536.59 per ounce. Traders are now factoring in a higher probability of a Fed rate cut in December. Analysts suggest Gold may see a brief recovery to around $2,650 but could face further declines if inflation expectations rise. Other precious metals, including silver, platinum, and palladium, also posted losses.

According to Reuters, a recent study suggests the International Monetary Fund (IMF) should sell 4% of its gold reserves, potentially raising $9.52 billion, to fund debt relief for low-income countries hit by climate-related disasters. This move would aid nations facing increased repayments to the IMF following crises like the COVID-19 pandemic. However, IMF gold sales are rare and would need broad member consensus. The proposal comes as climate financing discussions take focus at the COP29 summit.

Following its all-time high of $2,789.94 per troy ounce on October 31, Gold has declined to an eight-week low of $2,536.59. This pullback reflects the strengthening US dollar, bolstered by Trump’s re-election, as investors pivot to the dollar as a favored safe-haven asset amid persistent global tensions.
The 50-period Exponential Moving Averages (EMA), the Momentum oscillator, and the Relative Strength Index (RSI) support Gold’s downward direction. Specifically, prices are trading below the 50-period EMA, while the Momentum oscillator dropped below the 100 threshold, and the RSI is below the 50 baseline.
If the downward momentum persists, traders may focus on the following potential support levels: $2,533.58, $2,509.67, $2,424.42, and $2,338.28.
On the other hand, if the buyers take control of the market, the following potential resistance levels are estimated: $2,584.82, $2,601.05, $2,633.92, and $2,691.84.

In conclusion, Gold’s recent decline, driven by a strengthening US dollar and shifting market dynamics, has placed pressure on the precious metal. Although Gold retains its status as a safe-haven asset amid ongoing global uncertainties, the current environment favors the dollar, suggesting further downside potential in the near term. Key technical indicators reinforce this downward trend, but strategic support levels offer points to watch for potential stabilization. If conditions shift, Gold could see a recovery toward resistance levels, with its long-term appeal as an inflation hedge and portfolio diversifier intact.