Gold has shed over 6% of its year-to-date (YTD) gains, stumbling after a sharp early November retracement, as it recedes behind silver despite its stellar performance earlier in the year.
For eight consecutive months, from March through September, gold surged to remarkable highs, closing each month in positive territory and reaching an impressive peak of $2,749.30 per ounce.
However, the narrative shifted in early November, with prices retreating to $2,607.00 per ounce, despite heightened trading activity surpassing 1.1 million.
This reversal has eroded gold’s earlier gains, with its YTD performance dropping from 32.70% in September to about 25.95% in November, as it struggles to hold the $2,600 range amid shifting macroeconomic dynamics.
Market trend
Gold began 2024 trading at $2,071 per ounce, attempting to recover from the previous year’s low of $1,885.
- Its performance was rocky in January, but the metal regained its footing in March, buoyed by rising demand for safe-haven assets amidst lingering geopolitical tensions and fears of global economic instability.
- In March, trading volumes skyrocketed to 4.7 million shares, with gold closing the month at $2,227 per ounce, marking the start of an extraordinary rally that propelled the metal over 30% to its September high of $2,749 per ounce.
- However, November brought a sharp reversal as the U.S. presidential election acted as a key catalyst for the downturn, intensifying the impact of a strengthening U.S. dollar and rising Treasury yields.
These developments have erased a significant portion of gold’s earlier gains, leaving the metal down more than 6% from its YTD peak.
Likely drivers behind Gold’s retreat
Gold’s recent slump coincided with pivotal political and economic developments, most notably the outcome of the U.S. presidential election.
- The resounding 2024 victory of Donald Trump has ushered in a stronger U.S. dollar and rising Treasury yields, both of which have historically posed challenges for gold.
- Pro-dollar promises under the new administration are likely weighing on gold’s appeal as a safe-haven investment.
- Investor sentiment has shifted noticeably, with a more optimistic economic outlook under Trump’s presidency driving a rotation away from defensive assets like gold toward higher-risk alternatives such as equities and cryptocurrencies.
According to an analyst at StoneX, “The market was bracing for a contested election result. A clear Trump victory removes that uncertainty, boosting the dollar. Higher Treasury yields and dollar strength are now pressuring gold, and this shift appears to have staying power for the near term.”
The strengthening US dollar
- The decline in gold prices underscores the metal’s inverse relationship with the U.S. Dollar Index (DXY), often referred to as “Dixie.”
- A surging dollar, propelled by Trump’s policy agenda, has likely made gold less attractive to international investors.
- While gold’s recent retreat has rattled investors, many analysts believe its long-term fundamentals remain solid.
- Factors such as persistent geopolitical uncertainties, potential corrections in equity markets, and continued central bank activity could reignite interest in the metal.