Gold Update: Gold Limits Losses After Trump Victory

Donald Trump’s victory in the US has put pressure on gold and silver prices this week. The Dollar Index rose relatively sharply when it turned out that Trump won. Before the election results, the Dollar Index recorded 103.3. Immediately after the result, the Dollar Index stood at 105.2. A more expensive US dollar makes gold and silver more expensive internationally. This will cause demand to fall and ultimately the price of gold and silver will fall.

The market is anticipating this. The gold price was at $2740 per troy ounce just before the election. After the results were announced, the gold price dropped to $2650. Eventually there was a recovery, partly due to the interest rate cut by the FED that was announced on Thursday. The FED lowered the interest rate by 25 basis points. As a result, the Dollar Index dropped just below the level of 1.05 to eventually close at 1.048.

The gold price in euros closed this week at €80,499 per kg, which in percentage terms represents a loss of 1%. This is not too bad. Silver, as usual, fell more than gold. The silver price lost 2.4% in euros on a weekly basis and closed at €937 per kg. The market expects the economy to do better under Trump than under Harris. At the same time, the national debt will probably increase more under Trump. In the medium and long term, this is good news for gold and silver.

Ultimately, the government debts in the US, Japan and Europe have gotten out of hand and this will be at the expense of the value of a country’s currency. Despite a relatively strong economy in recent years, government debts are increasing rapidly worldwide. When the economy is doing less well, the size of government debts will increase rapidly. Central banks will then use monetary easing to stimulate the economy. At the expense of the value of the currency. That is precisely why people and companies store value in the form of gold and silver.

Citi Raises Price Target on Gold and Silver

More than a week ago, the American bank Citi raised the price target for gold. Citi predicts a deterioration of the labor market in the US, multiple interest rate cuts by the FED and an increase in demand for gold from investors. This is the reason for the analysts of Citi to raise the price target for gold in the coming three months from $2700 to $2800 per troy ounce.

The price target for gold over the next 12 months has also been revised upwards. Citi has a price target of $3,000 per troy ounce. The price target for silver has also been raised. Citi expects the silver price to rise to $40 per troy ounce over the next 6 to 12 months. The previous price target was $38. Citi noted that gold and silver have performed well despite the recent lower demand from China combined with rising interest rates in the US.

Since the 50 basis point rate cut in September in the US, the interest rate on the 10-year bond has since risen from 3.65% to 4.4%. The market is apparently not reassured about the size of the US government debt. Financing this government debt will become more difficult in the long term and rolling over the government debt will become more expensive as a result.