NEW YORK — Following a significant uptick in value earlier this year, the price of gold has taken a downturn in the wake of Donald Trump’s victory in the presidential election.
Gold values dipped by over 4% within four days post-Election Day, coinciding with a nearly 4% rise in the overall U.S. stock market. This shift comes despite investor expectations that a Trump presidency could lead to reductions in tax rates and increases in tariffs. Such developments could potentially escalate U.S. government debt and inflation—factors generally supportive of rising gold prices.
As of late Monday, gold was priced at $2,618 per ounce, significantly down from its recent high of about $2,800 recorded just weeks earlier. This decline has diminished its status as one of the year’s strongest performing investments. The largest exchange-traded fund that tracks gold prices observed its annual gains for 2024 fall back below 27%, a drop from nearly 35% just a short time prior.
So what’s driving this decline? A major factor has been the strengthening of the U.S. dollar relative to other key currencies. The tariffs and trade wars initiated by the U.S. may contribute to a depreciation of currencies like the euro, making gold more expensive for purchasers using these currencies, which dampens demand.
Furthermore, Trump’s inclination towards lower taxes and increased tariffs is pressuring Wall Street to revise down its forecasts for the number of interest rate cuts anticipated from the Federal Reserve in the upcoming year. Fewer rate cuts mean that Treasury bonds could yield higher interest, potentially making them more attractive compared to gold, which generates no dividends or income.
Nevertheless, gold maintains its reputation as a haven for investors seeking stability, especially during tumultuous global events. Investors often turn to gold amid uncertainties linked to wars or political turmoil. With ongoing conflicts in regions like the Middle East and Ukraine, as well as persistent political tensions, gold is likely to remain a staple in many investment portfolios.
According to investment managers at Robeco, which oversees assets for large institutional investors, “Gold continues to be the safe haven asset class of choice for both investors and central banks.”