US Election 2024: Gold Prices Drop as Donald Trump Wins—More Downside Ahead?
Donald Trump’s victory in the 2024 US presidential election has strengthened the US dollar, pressuring gold prices downward. As markets remain volatile, investors are closely watching the Federal Reserve’s upcoming policy decision on Thursday, a key factor likely to influence gold’s trajectory.
One of Trump’s significant campaign promises included implementing broad tariffs of 10–20% on imports, with potential rates up to 60% on goods from China. This stance has spurred expectations of increased spending on infrastructure, alongside tax cuts and deregulation. As a result, the US dollar and bond yields have both surged.
This environment does not favor gold, which saw recent gains amid expectations of further rate cuts by the Fed. Higher bond yields and lending rates tend to reduce gold’s appeal, as the non-yielding metal often moves inversely to US bond yields and the dollar. The 10-year Treasury yield has also hit a high, adding further pressure on gold prices.
Gold, while traditionally a hedge against inflation, may face more downside as investors adjust to this shifting economic landscape.
Now is it time to consider buying gold?
Prices are dropping as some investors reposition, moving out of gold and into risk assets with hopes of a stock market boom. This shift is partly fueled by the Trump administration’s approach to economic policy, including the assertion that the president should influence interest rates. Trump has even suggested removing Fed Chair Jerome Powell, potentially before his term ends, signaling a push for politicized, looser monetary policy, which would likely keep rates low. Such moves generally support market growth, drive inflation, and benefit gold in the long term, though gold may consolidate in the near term before climbing higher. We saw a similar pattern during Trump’s first term, suggesting that this dip could be a buying opportunity.
Gold faces both upward and downward pressures.
On one hand, the rising dollar and renewed interest in the stock market—encouraged by tax cuts across the board—may weigh on gold. However, several factors favor gold’s appreciation, including ongoing tariffs, a climbing national debt, increased geopolitical tensions, and potentially lower interest rates. Additionally, should the Russia-Ukraine conflict resolve soon, global political tensions may ease, cooling inflationary pressures and creating a “new normal” that could moderate gold prices, potentially around $2,000.
For those looking to buy, retail prices at places like APMEX adjust instantly to shifts in the spot price, plus a premium. However, if prices drop sharply, premiums may temporarily increase due to heightened demand.
Watch, Read, Listen
To understand the pricing of gold, it’s important to differentiate between a few key concepts, particularly the spot price, futures price, and premium.
- Spot Price: The spot price of gold is the current price at which gold can be purchased for immediate delivery. This price represents the most up-to-date cash value of gold for physical delivery, often set by well-known sites like Kitco, APMEX, or other major bullion dealers. The spot price fluctuates based on global supply and demand, and it’s typically used as the baseline or “standard” for quoting gold prices.
- Futures Price: Futures prices differ slightly from the spot price as they are associated with contracts for future delivery. These contracts are actively traded on exchanges like COMEX, where the futures price of gold is determined by the contract with the highest open interest (meaning the highest volume of outstanding orders). Futures prices can influence spot prices and are crucial for understanding market sentiment about where prices might head, but they are not the price one pays for immediate, physical gold.
- Premium: When purchasing physical gold, such as coins or bars, most buyers pay a premium over the spot price. This premium is the additional cost, usually a percentage above spot, that reflects manufacturing, distribution, and profit margins. For example, if the spot price of gold is $1,800 per ounce, and a dealer adds a 5% premium, a buyer would pay $1,890 per ounce. Premiums can vary significantly depending on the type of gold product and the dealer.
Example of Buying Gold: If you’re purchasing gold coins from APMEX, the price you see on the day of purchase will include both the spot price and any additional premium. APMEX and similar sellers help illustrate the cost you would actually pay, beyond just the raw market value.
In summary:
- Spot Price: The baseline price for immediate physical gold.
- Futures Price: The market-driven price for future delivery, based on the highest open-interest contract.
- Premium: The added cost above spot, specific to each gold product and seller.
This layered structure helps buyers understand the overall cost and factors involved in gold pricing