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2024/11
Wisunofx Market Update: Gold Prices Drop Nearly 2%—Impact of Trump's Treasury Secretary Nomination?
On the first trading day of this week, during the Asian session, spot gold exhibited a clear pattern of a sharp rise followed by a pullback. Earlier, due to a decline in the U.S. Dollar Index, gold prices surged quickly to a high of $2,721.21/oz, reflecting short-term market sentiment reacting rapidly to dollar weakness. However, this upward momentum was short-lived, as gold prices reversed in tandem with the dollar’s rebound, ending the earlier rally and marking the start of a reversal from the “Trump trade” initiated after the U.S. election.
Gold prices hit a low of $2,659.80/oz, down more than $50 compared to Friday’s close, before slightly rebounding to trade around $2,675.56/oz. The nearly 2% decline in gold prices was attributed to profit-taking and the impact of Trump’s Treasury Secretary nomination. President-elect Trump’s nomination of prominent investor Scott Bessent as Treasury Secretary added to the downward pressure on gold prices.
Key Reasons for Gold’s Near 2% Decline
1.Profit-Taking:
After five consecutive days of gains, gold prices experienced a pullback—a common market phenomenon. Investors tend to lock in profits after sustained price increases, especially in the absence of further positive catalysts. This behavior exerted downward pressure on gold prices.
2.Impact of Trump’s Treasury Secretary Nomination:
President-elect Trump nominated renowned investor Scott Bessent as Treasury Secretary. This nomination likely strengthened market expectations of pro-growth fiscal policies from the Trump administration, such as tax reforms and infrastructure investments. These policies are anticipated to bolster the dollar, which in turn exerts pressure on gold. A stronger dollar makes gold, priced in dollars, relatively more expensive for overseas buyers.
Significance of the Treasury Secretary Nomination
The Treasury Secretary role has profound implications for U.S. economic policies, regulatory measures, and international affairs. Bessent, highly regarded on Wall Street, is viewed as a pragmatic advocate for economic policies. His stance on tax reforms and deregulation, coupled with a potential reduction in aggressive trade tariffs, could ease concerns over severe trade conflicts. Such policy directions could not only stabilize the economy and markets but also boost investor confidence in stocks and bonds.
While the initial drop in the dollar temporarily supported gold prices, the market quickly realized that reduced trade conflict risks diminish gold’s appeal as a safe-haven asset. Consequently, gold’s gains were unsustainable, and prices fell alongside the dollar.
Current Gold Price Status
- Gold prices have retreated from their highs and are currently trading around $2,665.42/oz, indicating a tug-of-war between bulls and bears in the short term.
- Profit-taking is part of a technical adjustment, while the Treasury Secretary nomination brings more significant policy-driven impacts.
Technical Analysis & Profit-Taking Factors
It is noteworthy that this week marks the Thanksgiving holiday in the U.S., coinciding with the last full trading week of November. Some gold bulls chose to take profits at higher levels, adding extra pressure on prices. Additionally, as gold broke below the critical support level of $2,690/oz, a large number of stop-loss orders were triggered, activating algorithmic trading systems. This led to a rapid $30 plunge, with prices briefly touching the $2,660/oz level.
Currently, although gold has found some support near $2,660/oz and rebounded to the $2,670/oz mark, both fundamental and technical factors suggest further downside pressure in the short term. According to technical analysis, the 50% Fibonacci retracement of the rally from $2,536/oz to $2,721/oz lies near $2,650.86/oz, while stronger 61.8% retracement support is at $2,607.36/oz. These levels are key support zones for market participants to monitor.
On the resistance side, the $2,690/oz and $2,700/oz levels are significant short-term barriers. If gold prices fail to breach these levels effectively, downward pressure could intensify.
Fundamental Factors to Watch and Future Risks
From a fundamental perspective, investors should closely monitor the following:
- Geopolitical and Political Developments:Market interpretations of Scott Bessent’s nomination as Treasury Secretary may provide new insights into dollar and gold movements.
- Federal Reserve Policy Updates:This week’s Federal Reserve meeting minutes and the much-anticipated U.S. October PCE data will offer clearer guidance on future monetary policy.
- Market Sentiment and Trading Strategies:With the Thanksgiving holiday approaching, trading volumes may decrease, but volatility risks could rise. Investors need to remain vigilant.
Conclusion
Overall, spot gold remains under short-term pressure, influenced by fluctuations in the dollar, political news, and profit-taking effects. When formulating trading strategies, investors should focus on the critical support levels at $2,650.86/ozand $2,607.36/oz, as well as resistance at $2,690/oz and $2,700/oz.
Additionally, investors should consider geopolitical developments, Federal Reserve policy expectations, and the holiday market environment to assess market dynamics comprehensively. Adjusting trading strategies flexibly will ensure alignment with changes in both fundamental and technical factors.
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