Trump 2.0 effect: Gold buyers breathe easy after biggest one-day price drop in three years
Trump's win keeps US dollar, global stocks up, with gold price down by over $100 per ounce
Dubai: Good news for gold shoppers! Gold prices have crashed by $100 per ounce as stock markets worldwide kept rising for a second day after the US election outcome. And what's more, a near Dh10 drop per gram was seen across the UAE too.
After shooting up to its highest-ever $2,790 per ounce level last week, spot gold price has dropped to around $2,690 globally, in what would be its biggest single-day drop in over three years.
All of these price declines were being reflected in the UAE gold rate on Thursday, with a gram of the closely-tracked 22-karat gold trading between Dh298.75 to Dh301, compared to Dh307.75 on Tuesday and when it was at its highest ever at Dh311.25 on October 30.
The last time the precious yellow metal fell this much was in March 2021, when the price fell by about $97.80 per ounce, or roughly 5.5 per cent, which then translated to a drop of between Dh15 and Dh20 per gram in the UAE.
Once it became clear that Donald Trump would be the next US President, a lot has been changing in the global markets. US stocks gained 1,500 points overnight, Bitcoin has broken the $75,000 level, and the greenback strengthened since.
Rallying markets
Although it was a given that gold prices would soften, what the markets – and shoppers – are seeing right now is more than just a price correction. It is a major reset in itself, caused by what is being referred to as the 'Trump trade' or the 'Trump 2.0' coming into effect in the markets currently.
Additionally, market analysts pointed out that investors are also pricing in a 25-basis-point rate cut by the US Federal Reserve on Thursday, with focus shifting to the Fed's tone on future cuts.
The Fed rate cut could potentially cool investor enthusiasm for stocks in the short term, the experts evaluate, but for now, they add that markets will stay buzzing from the post-election rally, even as a pullback may be in the cards as the initial excitement fades.
"Into year end, today’s rate cut will likely further boost risk assets helping stocks build on year-to-date rallies with potential for small cap stocks to continue to make up ground on tech heavy names, as Trump policies would support local businesses via tax cuts and protectionist policy," said Neal Keane, Head of Global Sales Trading at ADSS.
"Aside from an end-of-year rally in stocks, Bitcoin looks an obvious winner with a fresh record high traded today above $76,000, with further gains towards $100,000 likely. While the dollar had its biggest one-day gain since March post-Wednesday’s election result, there is likely to be more two-way action going forward amid a slew of rate decisions from major central banks into year end.”
The prospect of higher inflationary pressure could complicate matters for Fed boss Jerome Powell. Earlier, the Bank of England (BoE) announced a widely expected 25-basis-point cut, its second reduction since August, as inflation in Britain fell below its target rate, with Sweden's central bank also dropped borrowing costs by 50 basis points, its biggest reduction in a decade.