#USA Elections##GoldTechnical analysis#24K99 News On Wednesday, November 6th, after Trump was elected President of the USA, investors rushed to buy US dollars, causing gold prices to plummet to a three-week low. FXStreet analyst Christian Borjon Valencia wrote an article analyzing the technical trend of gold prices.
The market is also focusing on the Federal Reserve's interest rate decision on Thursday to seek further clues about the Fed's loose cycle. This cycle has led to historical highs in gold prices this year.
Valencia pointed out that Trump's decisive victory raised US bond yields and pushed the dollar to a four-month high, causing gold prices to plummet on Wednesday. The Fed is expected to cut rates on Thursday, which may halt the decline in gold prices.
Spot gold closed down $84.81 on Wednesday, a decrease of 3.09%, at $2658.87 per ounce, marking the largest single-day drop in five months.
Valencia wrote that after the end of the 2024 US presidential election, gold prices plummeted to below $2700 per ounce, a three-week low on Wednesday. Republican candidate and former President Donald Trump won the election, boosting the dollar and US bond yields.
The US Dollar Index hit a 4-month high, making dollar-denominated gold more expensive for non-US dollar buyers.
ICE USD index surged 175 points at Wednesday's close, up 1.69%, to 105.16.
The yield on the benchmark 10-year US Treasury note soared by 16 basis points to 4.437%.
Investors have indicated that Trump's presidency is expected to boost the US dollar as he is anticipated to introduce new tariff policies, potentially triggering a surge in inflation and causing the Fed to pause its easing cycle.
Valencia pointed out that due to Trump's victory not being as close as expected, traders' uncertainty has finally subsided. In addition, with the Republicans completing a red sweep, gaining a majority in the Senate and controlling the House, market participants have propelled the US stock market to record highs, causing the US dollar to surge to a four-month high, US bond yields to rise, and the 'Trump trade' to continue.
Stone X analyst Rhona Connell stated: "The market initially anticipated controversy in the election results, but Trump's clear victory eliminated this uncertainty, reducing risk. Trump's election has led to a strong rise in the dollar, and the combination of these factors has caused gold prices to fall."
The Fed's decision is coming.
Following a 50-basis-point rate cut in September, investors widely expect the Fed to cut rates by 25 basis points this time.
Valencia pointed out that on Thursday, the US economic agenda will focus on the Fed's monetary policy decision. It is expected that the Fed will lower borrowing costs by 25 basis points to a range of 4.50%-4.75%.
Valencia stated that investors continue to digest the outlook of the USA economy. Trump's economic policy suggests imposing tariffs, expanding the fiscal deficit, and reducing taxes. His economic proposals are inconsistent with the Fed's policy of fighting inflation. Therefore, the Fed will be forced to adopt a gradual approach when loosening monetary policy.
Shengbao banks csi commodity equity index strategy director Ole Hansen stated that after Trump imposed new tariffs, the risk of rising inflation may slow down the pace of Fed rate cuts.
Hansen said: "USAThe Federal Open Market Committee (FOMC)(FOMC) is likely to cut interest rates this week, but the market will carefully study the wording of the post-meeting statement to see if there are signs of pausing rate cuts.
How to trade gold?
Valencia pointed out that the gold price fell below $2700 per ounce and broke below the high set on September 26.ResistanceAt $2685 per ounce, this caused the gold price to drop to the $2650 per ounce range. If it falls below this dollar range, it will make gold target the 50-day (SMA) at $2635 per ounce.Simple Moving AverageIf it breaks down, the gold price may fall to $2600 per ounce.
(Spot gold daily chart source: FXStreet)
On the other hand, Valencia added that if buyers push the gold price above $2700 per ounce, gold may consolidate near that area. However, if it breaks through the October 23rd high of $2758 per ounce, the gold price may test the record high of $2790 per ounce in the short term.
Valencia stated that the momentum favors the sellers.Relative Strength IndexThe Relative Strength Index (RSI) has turned bearish after sharply breaking below the neutral line.
