Though Donald Trump’s victory in the 2024 presidential election proved a catalyst for an exceptional rally in the stock and cryptocurrency markets, not all assets – or asset classes – were driven into an uptrend.
Gold, the world’s biggest commodity, with a market capitalization exceeding $17 trillion, ended its long-standing rise with the November 6 results and entered a sharp decline, which sent its price from late October highs near $2,800 to the press time price of $2,547.
The drop has been particularly sharp in the last five days of trading, leading to a 5.78% fall.
Gold 5-day price chart. Source: TradingView
Gold’s five consecutive days of decline led to the precious metal breaking the $2,536 mark to a two-month low, as the surge in the dollar weighed on prices. In the process, the commodity crashed below its 100-day moving average (MA), and should it attempt a rebound, it may encounter resistance near $2,580, and further upward movement will test the round mark of $2,600.
Is the 2024 gold price drop a rerun of 2016?
Still, the market reaction to Trump’s reelection can’t exactly be described as surprising as gold reacted in a highly similar fashion in 2016 – as did other assets such as stocks.
Furthermore, in yet another proof that history rhymes rather than repeats, the 2024 situation is different in that the world’s biggest commodity was on a wider downtrend between August 2016 and January 2017, while this year, it had been rallying nearly ceaselessly until election night.
There are multiple possible explanations for gold’s performance in the wake of Donald Trump’s victory and most – if not all – of them are likely contributing to the press-time market dynamic.
Are investors selling gold and silver to buy stocks and crypto?
Finally, the rally observable with other assets – Bitcoin (BTC) has recently surged above $90,000, and the S&P 500 briefly climbed above 6,000 points, just to name a few – may also be a driver.
Around the time the election results became known, there was a major surge in gold and silver – another commodity that has recently entered a downtrend – volume, opening the possibility investors were selling the safe-haven precious metals to fund a buying spree elsewhere.
Whatever the reasons may be, the $200, 2-week drop in the price of gold indicates that gold is almost certain to fall below $2,500 before stabilizing and, possibly, reigniting the rally, particularly if the post-election downtrend lasts as long as it did in 2016.
Mike McGlone, the senior commodity strategist at Bloomberg Intelligence, opined that gold might now be seeking a foundation as low as $2,400 in an X post published on November 12. Still, he left the possibility of another surge toward $3,000 – should the precious metal decisively reclaim $2,600 – or even a retest of the $2,000 in case of a sustained plummet below $2,400.
Gold price falls together with a perceived reduction in geopolitical tensions
Throughout 2024, the high geopolitical tensions were frequently cited as a big driver of the gold rally, and Trump – who has positioned himself as a peaceful dove in 2016 and 2024 alike – is seen as lessening the danger of the breakout of the Third World War.
Indeed, the Republican is widely seen as close to Russian President Vladimir Putin, leading many to believe the War in Ukraine will end soon after the President-Elect takes office.
Why Donald Trump’s victory might not reduce geopolitical tensions
Still, it is worth pointing out that the majority of the perceived danger stems from the potential expansion of the war in the Middle East into a full confrontation with Iran.
In his first term, Donald Trump reportedly came within 10 minutes of a war with Iran, and his previous administration was very supportive of Israel, meaning a true deescalatory effort is unlikely.
The fate of Ukraine might also ultimately not depend on Trump’s stated respect for Putin – or vice versa – given how relevant it is for the U.S. armaments industry and, allegedly, other companies like BlackRock (NYSE: BLK).
China and the future relations between the People’s Republic and the U.S. are also uncertain. The previous Republican administration famously entered into something of a trade war with the Asian country, and Trump’s tariff plans certainly hint at a rerun.
Did Vladimir Putin drive gold prices down and the dollar up?
Still, Putin may have offered some indirect aid to the incoming administration and, by extension, helped drive gold down and the dollar up. Specifically, another factor frequently cited as a major driver of the commodity’s rally has been the de-dollarization effort seen primarily among the BRICS nations.
On November 7, the Russian state-owned TASS news agency reported that the country’s President said the Federation is ‘not rejecting dollar use.’
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