Gold continued to slip on Tuesday after market expectations for higher growth and spending from a Donald Trump presidency. Trumps win on November 8th pushed the dollar and bond yields on higher spending and interest rates.
“We see this as a short-covering rally than a fundamental change,” said ING’s head of commodities strategy Hamza Khan, adding that a rise in equities and the dollar were signs of sustained pressure on gold in the medium term. Gold lows have spurred physical buying by bargain hunters, Khan said. This could solidify a floor for bullion rather than push higher. “Right now we are just not sure where that floor is,” he said.
Gold has fallen more than $100 an ounce from its postelection peak on November 9th. U.S. Treasury yields had their largest two week rise in over five years as the dollar shot higher. Interest rates are expected to rise in December which is preventing gold from pushing further.
“Gold kept its head above water, with technical-based buying supporting the market. However, with the market increasing bets on a December rate hike in the U.S., this buying is unlikely to persist in the short term.” ANZ analysts stated.
Goldman Sachs lowered its three to six month gold price outlook to $1,200 per troy ounce and stated that downside risks remain from potential physical ETF liquidation on Monday.