Gold prices fell again on Tuesday after a cratering fall on Monday as traders unwound their hedging trades after the US election. Gold surged in the run-up to the election on a mix of concerns about Trump’s inflationary policies and broader safe-haven positioning, which saw gold break to fresh highs on numerous occasions.
With the uncertainty of the election firmly behind us, safe haven positioning no longer has its attractions, and a strengthening dollar is also weighing heavily on prices.
“Gold is under intense pressure on multiple fronts. Institutional sell-offs have driven prices down nearly 3% since Monday, pushing it below $2,600 for the first time since September 20. The trading narrative has shifted sharply from risk-off hedging to an ‘America First’ stance. The steady unloading of GLD holdings by the SPDR Gold Trust and other major institutions since November underscores this pivot,” said Dilin Wu Research Strategist at Pepperstone.
Wu continued to explain that central banks are also reducing their purchases of gold, reducing demand from one of the largest players in the market.
“Adding to the pressure, central banks have slowed their gold purchases, with the People’s Bank of China pausing for six months. With both institutional and central bank support waning, gold’s near-term outlook appears increasingly bleak. If U.S. CPI and retail sales data this week exceed expectations, the dollar index could test 106, further tightening the screws on gold.”