Gold and Silver Slide as Markets Digest Trump Election Victory

 

Precious Metals Drop to End a Volatile Week

(Bullion News Network) – Precious metals markets wrapped up a volatile week today. Gold and silver prices stabilized on Monday as traders braced for Election Day in the United States. Prices dropped dramatically on Wednesday after traders reacted to Donald Trump’s successful bid for reelection. Yesterday, a run-up triggered by a 25 basis-point rate cut by the Federal Reserve drove gold back above $2,700/oz and silver past the $32/oz line. Rate cut bullishness faded this morning, and prices for both metals continued to slide as markets digested the potential impacts of another Trump victory. 

This latest market rout pulled silver prices down to around $31.35/oz, which is around 20 cents higher than the local low from Wednesday. Silver briefly crested above $32 after markets reacted to the FOMC’s decision to cut rates by another 25 bps on Thursday but will end the week within striking distance of a one-month low. Gold traced a similar trendline, dropping to its lowest point since October 14th on Wednesday before cresting above the $2,700/oz line after the Fed’s Thursday meeting. The metal will finish the day in the red on the week, losing about $20 as markets digest Trump’s election win. 

As we reported on Wednesday, the last two days of this week should function as a tug-of-war between rate cut bullishness and a bearish metals market reaction to the prospects of another Donald Trump presidency. Gold and silver price action on both Thursday and Friday reaffirm this trend; prices jumped after Jerome Powell’s Federal Reserve confirmed a 25 point rate cut before falling as markets continued to reckon with how President-Elect Donald Trump’s tariff plans may influence consumer prices, international relations, and financial stability. 

Trump’s Tariff Talk Boosts American Stocks, Stifles Precious Metals

The 2024 presidential election has been a major driver of gold and silver price action all year. Metal prices jumped in the weeks leading up to Election Day as traders hedged against uncertainty in the face of a historically contested election. With American economic anxiety hovering near an all-time high at the conclusion of President Joe Biden’s first term, both domestic and international policy took centerstage in the high-stakes race for the White House. 

After the GOP secured both the White House and the Senate on Tuesday, traders and economists turned their attention to one policy in particular – tariffs. On the campaign trail, President-Elect Trump repeatedly emphasized his plan to use tariffs to extract funds from rivals while bolstering the strength of the United States Dollar. The soon-to-be American President’s proposal would institute a universal 10-20% tariff on all imported goods, as well as a much larger 60-100% tariff on goods produced in China. 

Economists are divided on how the extensive tariff plan would impact consumer prices. The stock market jumped immediately after the presidential race was called for Mr. Trump, and both the Dow and S&P 500 will end a historic week of milestones in the green. Speculation surrounding the President-Elect’s tariff plans strengthened the United States Dollar as other national currencies took a major hit, and many businesses are preparing for a period of laxer regulations compared to the Biden administration. 

Strong signals for American currency dominance and an extremely bullish stock market led to falling precious metal prices, a trend that continued today to end the week. Gold dropped over $80 on Wednesday as traders reacted to Trump’s re-election and a thriving stock market. Although good news for rate cut enthusiasts on Wednesday partially reversed this trend, the precious metals market rout recommenced on Friday while Wall Street’s celebration raged on. 

Gold Specs Profit-Taking Risks vs. ETF Investors – The decisive US transfer of power sparked some #gold profit taking, but a second term for president-elect Donald Trump may solidify the metal’s underpinnings.
The full report is on the Bloomberg terminal here:… pic.twitter.com/tFgIG7luqT

— Mike McGlone (@mikemcglone11) November 8, 2024

Market Analysts Consider the Impacts of a Trump Economy 

Markets are just a few days separated from Donald Trump’s electoral victory, which some pundits have called the greatest political comeback in United States history. Historic stock market performances this week suggest that traders are bullish on how Mr. Trump’s promise of major deregulation will impact the competitiveness – and profit margins – of American businesses. Given that the President-Elect’s tariff plans would threaten the national currencies of America’s rivals, it should come as no surprise that U.S. markets are already celebrating in the wake of four years of a Donald Trump administration. 

Precious metal prices often negatively correlate with traditional asset performance, particularly in the stock market. Investors tend to purchase gold and silver, which are considered safe haven assets, when economic and financial triggers limit the profitability of investing in traditional assets, such as stocks and bonds. This relationship also explains why gold and silver often over-perform during climates characterized by falling interest rates; since cutting rates is an inflationary action, rate cuts make inflation hedges like gold and silver appear more attractive in the medium to long term. 

In other words, this week’s exceptional stock market bullishness is a bearish signal for precious metals. Traders anticipate that, at least in the short term, Donald Trump’s second term will be a period of laxer regulations for businesses and a stronger USD, increasing the opportunity-cost of investing in non-interest bearing alternative assets like gold, silver, and other precious metals. 

It is unclear how long this trend will hold, though. Some economists have suggested that some of Mr. Trump’s proposed policies, including mass deportation of undocumented migrant workers and blanket tariffs on imported goods, would significantly increase inflation and reduce the GDP of the United States. If this theory is confirmed when the new administration’s policy proposals come into effect, a reversal of course for precious metal and traditional markets could be in the cards. 

Foreign Policy Poses Big Question Mark For Traders as Trump Prepares To Retake White House

Economic questions surrounding a second Trump term are already impacting American markets, but some investors are turning to foreign policy for clues on how markets might react when President-Elect Donald Trump retakes the White House in January of next year. Throughout 2024, geopolitical uncertainty has been a major driver of precious metal prices. Ongoing wars in Gaza and Ukraine motivated several of gold’s all-time highs in Q2, Q3, and Q4 of 2024, and heightening tensions in the Middle East pose a significant threat to geopolitical stability in the region. 

During the 2024 presidential race, the Trump campaign repeatedly emphasized that the candidate would aim to reduce American involvement in foreign conflicts, including the war between Russia and Ukraine. In the Israel-Gaza conflict, Mr. Trump’s rhetoric has been highly supportive of Israel, an American ally that many national security experts consider key to U.S. interests in the region. While the exact details of how a second Trump administration will handle the slew of international conflicts are not yet clear, most analysts say that President Trump’s approach to foreign policy will be a significant departure from the Biden administration. 

These lingering foreign policy questions will be essential to how precious metal markets react during – and after – the transition of power as former President Trump settles in for his second term as President of the United States.