Gold has been under pressure for the second week in a row, with the precious metal struggling to power and find support above the $2650 an ounce level. The bearish tone comes amid increased profit booking due to a massive rally year to date. The yellow metal is up by more than 30% for the year, outperforming the equity markets.
Trump’s Impact on Gold
Nevertheless, the upward momentum in gold has waned in recent weeks amid increasing focus on Bitcoin. Since Donald Trump won the hotly contested election, cryptocurrency has been the centre of attention. Likewise, it has since powered through the $100,000 level in the aftermath of Donald Trump picking Paul Atkins, a pro-crypto proponent, to head the Securities and Exchange Commission SEC.
On the other hand, gold has remained well supported above the $2600 an ounce level amid growing concerns that Trump’s policies could trigger heightened geopolitical risk. His calls for a 25% tariff on Canada and added tariffs on imports from China have triggered a sense of uneasiness in the market. In response, traders and institutions have reacted by buying gold as a safe haven.
JPMorgan and HSBC analysts have emphasized gold’s function as a hedge against geopolitical unpredictability, pointing out that increased international tensions and conflicts have increased its allure. They underlined that the policies of President-elect Trump may increase geopolitical risks even more, which could help gold’s position as a safe-haven asset into 2025.
According to JPMorgan, the post-election sell-off in gold was a positioning-driven blunder rather than a radical shift. According to the investment bank’s analysts, physical demand and less frothy futures positioning will pave the way for additional price increases in 2025, which should see gold prices rise toward $3,000/oz.
Likewise, the prospect of lower interest rates as the Federal Reserve continues to cut to steer the economy into a soft landing has also fuelled higher gold prices. Gold has always performed better in low interest rate environments as a focus in the financial markets shifts from yielding assets.
Central Banks Buying Spree
A buying spree from Eastern European central banks has also helped support higher gold prices. Central bank policymakers from Warsaw to Belgrade have been buying into gold as one of the ways of diversifying their investments and betting on future price increases. Likewise, the regions have emerged as one of the most prominent precious metal buyers, therefore helping drive the gold rally.
In an area devastated by Europe’s previous wars and now adjacent to the continent’s bloodiest conflict since World War II, pursuing a sense of security is a compelling motivation. According to the most recent data from the World Gold Council, Poland, which borders Ukraine and strongly supports Kyiv’s war objectives, was the world’s biggest buyer of gold in the second quarter. Adam Glapinski, the governor of Poland’s central bank, stated that hard currency and gold reserves are essential for safeguarding the economy from disastrous occurrences. As of September, he had raised his bullion holdings to about 420 tons, which is roughly half of what Japan or India have.
As a buffer against external shocks like potential trade wars triggered by Donald Trump’s second term and geopolitical tensions in the Middle East and Ukraine, central banks worldwide are building up their gold reserves. However, the monetary guardians of Eastern Europe have made a special effort to add to their gold reserves.
