Trump’s America-First Policy Drives US Dollar And Bond Yields Higher, Pushing Gold Prices Down 3%, Silver Prices Down 5%

(November 6, 2024 - Niels Christensen)

(Kitco News) - After a tight race, former President Donald Trump will become the 47th President of the U.S., and his America-first philosophy is driving the U.S. dollar and bond yields higher, which is taking a significant toll on gold and silver.

Spot gold prices are currently down 3% as the North American trading session kicks off, last trading at $2,657.60 an ounce. At the same time, silver is down 5% on the day, last trading at $30.95 an ounce.

Ole Hansen, Head of Commodity Strategy at Saxo Bank, said that while the selloff in gold and silver is dramatic, it’s not surprising given how far the precious metals have run in recent weeks.

“Today’s strong dollar rally is the main reason why gold is struggling, to the extent that it broke support levels, which then triggered some additional long liquidation,” he said. At the same time, Hansen noted that falling copper prices are also taking their toll on silver.

However, Hansen also added that gold and silver have been long overdue for a correction, and this selloff could be seen as a new buying opportunity. He pointed out that despite the rally in the U.S. dollar, the outlook for the U.S. economy and government spending hasn’t changed.

“The U.S. debt situation will likely go from bad to worse unless the other big winner, Elon Musk, gets his D.O.G.E. department up and running and finds savings. In addition, tariffs will raise inflation concerns, which should more than offset a potential slowdown in U.S. rate cuts. The biggest short-term challenge remains the outlook for diverging central banks supporting the dollar, thereby raising a few hurdles,” he said.

Matthew Jones, a precious metals analyst at Solomon Global, also sees a bright future for gold despite the short-term headwinds.

“The promise of fiscal stimulus has pushed bond yields higher as markets price in potential inflation and growth under the Trump administration. This rally in the dollar and yields has put pressure on gold, which traditionally falls as real interest rates rise, reflecting reduced demand for safe-haven assets in the short term,” he said. “However, from a longer-term, macro perspective, the future is 'as good as gold.'”

Jones added that Trump’s America-first policy, which would include higher across-the-board tariffs, could prove to be positive for precious metals. “Trade wars can hit and disrupt financial markets in a far more sudden and unexpected manner than physical wars,” Jones said. “In the longer term, the landscape could shift depending on how effectively these policies are implemented and their broader economic impacts. Persistent deficit expansion or trade tensions could introduce volatility to the dollar, possibly leading investors back to gold and other assets as hedges against economic uncertainty.”