According to Bloomberg: Gold prices have experienced a significant drop following Donald Trump’s decisive victory in the 2024 U.S. presidential election, as market confidence grows and demand for safe-haven assets diminishes. The two days immediately after the Republican win marked the worst performance for gold in at least 13 presidential election cycles, according to Deutsche Bank. Gold prices have fallen nearly 7% since Election Day, highlighting a stark turnaround for a commodity that surged over 30% in the year leading up to the vote.
Gold's Worst Post-Election Performance in Decades
Deutsche Bank data shows that gold's post-election decline in 2024 was the steepest among U.S. presidential election cycles. This contrasts sharply with other asset classes, such as stocks and cryptocurrencies, which have rallied following Trump’s win. Bitcoin, for example, hit new all-time highs above $90,000, attracting investor attention previously directed toward gold.
“When equities and other risk assets perform well, investors are less inclined to turn to gold,” noted Rob Haworth, senior investment strategy director at U.S. Bank. Gold's safe-haven appeal has been muted by the certainty brought by Trump’s win, reducing fears of a contested election.
Rising Dollar and Strong Economy Weigh on Gold
A rallying U.S. dollar, coupled with easing inflation and stable economic indicators, has further pressured gold prices. The Federal Reserve’s current stance on interest rates, with no immediate plans for further cuts, has also tempered gold's attractiveness as an inflation hedge.
“Gold would be a contrarian call in today’s market,” said Matt Miskin, co-chief investment strategist at John Hancock Investment Management. "The sentiment now is that there’s very little risk fundamentally or geopolitically, which reduces the allure of gold."
Investors Pivot to Bitcoin and Risk Assets
Cryptocurrencies have emerged as a preferred alternative investment in the wake of Trump’s victory. The iShares Bitcoin Trust ETF, managed by BlackRock, saw total assets surpass $40 billion for the first time this past week. This coincided with significant outflows from SPDR Gold Shares, the largest physically-backed gold ETF.
“With Trump’s policies likely to reduce cryptocurrency regulation, speculative capital that once supported gold may now flow into digital assets,” said Kristina Hooper, chief global market strategist at Invesco Advisers.
Long-Term Outlook for Gold
Despite the current selloff, analysts believe gold may regain its shine over the long term. Trump’s pledges on tax cuts and tariffs are expected to increase deficits and inflation, potentially restoring gold’s appeal as an inflation hedge. Additionally, disruptions in global trade and geopolitics during Trump’s second term could prompt central banks in countries like China and Russia to bolster gold reserves as a hedge against dollar volatility.
“This selloff is a buy-the-dip story,” said Rajeev De Mello, global macro portfolio manager at Gama Asset Management. “Gold is entering a more affordable range, which could trigger renewed interest from investors seeking long-term stability.”
While gold has lost some luster in the immediate aftermath of Trump’s election win, its longer-term prospects remain tied to global economic and geopolitical developments. For now, however, the market appears to favor riskier assets and cryptocurrencies, reflecting a shift in investor sentiment toward growth-oriented opportunities.
