Due to Donald Trump's election victory last week continuing to boost the dollar, gold fell to a one-month low.

As the US dollar index rose to its highest level in a year, the price of gold fell by 0.6% at one point (down 2.5% the previous trading day), with the increase related to Trump's promises of tax cuts and trade tariffs. The stronger dollar made dollar-denominated commodities more expensive for most buyers.

Since the election last week, precious metals have fallen by about 5%, with hedge funds unwinding call bets. The flow of exchange-traded fund funds in the US stock market has become less supportive amid general rotation. According to Chris Weston, Research Director at Pepperstone Group Ltd., the sell-off, after breaking below the 50-day moving average leading to funds covering long positions, is also partly technical.

Gold prices have risen by over 25% this year, supported by a loose Fed cycle, central bank purchases, and increasing hedging demand driven by geopolitical and economic risks.

Investors will focus on the core Consumer Price Index report to be released on Wednesday (excluding food and energy) in order to understand the Fed's loose path. The Fed cut rates by 25 basis points last week. Many economists believe that the inflation impact of Trump's policies will result in fewer rate cuts than previously expected. Lower borrowing costs often benefit gold as gold does not yield interest.

(Chart of Spot Gold Trend, Source: FX168)

At the time of writing, spot gold fell by 1.03% to $2,592.50 per ounce, about 7% lower than the historic high set last month. Bloomberg's Dollar Spot Index has risen for the third consecutive day. Silver, palladium, and platinum have all fallen.