Gold – Trump’s possible victory: profit-taking in the market ??

 Since breaking out above 2,530 US dollars at the end of August, the price of gold has only known one way up. After a stormy rise, a new all-time high of 2,790 US dollars was reached yesterday, Wednesday. A major consolidation or even a real correction has so far been absent.

The increased volatility has only resulted in two sharp, but overall very manageable, setbacks. Instead, gold bulls are storming from one new all-time high to the next.

Overall, the rally on the gold market has been going on since autumn 2022. The triple low at 1,615 US dollars marked the trend reversal at that time. However, the upward movement has only gained significant momentum in the last twelve and a half months. Starting at 1,810 US dollars, the gold price completed its summer correction on October 5, 2023.

Since then, there has been an impressive increase of over +54%.

In particular, the geopolitical escalation in the Middle East since the Hamas invasion has been one of the main drivers. Of course, the ongoing drama in Ukraine as well as strong physical demand from Asia and the BRICS' ongoing move away from the US dollar also played a decisive role.

Accordingly, it can certainly be argued that the significantly increased price of gold includes a certain “war premium”.
Gold in US dollars on the night of the US election in 2016, weekly chart from October 31, 2024.

If Donald Trump wins the 2024 US presidential election, there are strong indications that he would pursue a de-escalation strategy for both the Ukraine conflict and tensions in the Middle East. Regarding Ukraine, Trump's advisers are outlining a model of a "frozen conflict" with autonomous regions and a demilitarized zone, with Ukraine remaining outside NATO.

Trump himself criticizes the current situation and emphasizes that any deal, even a bad one, would be better than the current situation. A similar approach can be assumed for the Middle East, with Trump likely relying on his supposed skills as a deal-maker to defuse the conflicts through negotiations and economic pressure rather than relying on military solutions.

Whether Donald Trump will actually bring about a de-escalation remains to be seen.

We are currently particularly interested in whether the markets might start to price in a de-escalation in the future. This could actually lead to profit-taking in the overheated gold market.

Even Mr Trump will not be able to solve the problem of dramatic US debt, but his election victory could well trigger a setback in precious metal prices lasting several weeks, similar to what happened in 2016.

At that time, his surprise victory on election night initially caused a sharp spike to almost 1,340 US dollars. But the very next morning, the price of gold collapsed and collapsed in the following six weeks to 1,122 US dollars (-16.6%).

Accordingly, we would be somewhat cautious in the short term. According to a Bloomberg survey, over two-thirds of the experts surveyed recommend gold as a hedge against the uncertainties of a Trump presidency. As convinced counter-cyclicals, we are alert to such expectations and suspect the opposite, because the potential surprise lies in a falling gold price. In the medium and long term, however, Trump's announced economic policy, particularly with regard to tariffs, tax cuts and trade wars, could weaken the US dollar and fuel inflation again. This should then make the gold price even more attractive.


Gold in US $ – target of 2,800 $ almost reached..

Gold in US dollars, daily chart from October 31, 2024. 

On its daily chart, the gold price has been showing an almost straight upward trend for months. And even in the few consolidations lasting several weeks, the bears had little to laugh about. A break in the established upward trend would only be possible if the gold price fell below 2,560 US dollars. However, in the wake of increased volatility and possible profit-taking, one or two support zones could well be tested in the coming weeks. There is a very strong support zone in the area of ​​2,600 US dollars in particular.
However, the daily stochastics are still running like clockwork in a bullish embedded state and are securing the upward momentum for now. A bigger slap from the bears is definitely needed to break up this extremely bullish structure.

For now, the technical probabilities suggest that the rally will continue.

However, many leveraged speculators are sitting on extraordinarily high profits, which could be realized at any time on the paper gold market with the click of a mouse. Regardless of the fundamental conditions, a well-known waterfall-like sell-off could be triggered, particularly due to the heavily overbought situation.
With a little patience and a solid liquidity position, there might be another good buying opportunity on the money market by mid-December, because the overall upward trend is intact and gold has not yet reached all of its price targets.

Trump’s possible victory: profit-taking in the gold market??

The price of gold has been on an impressive upward trend for months, driven by geopolitical tensions, strong physical demand from Asia and the BRICS countries' increasing move away from the US dollar. It was only in the spring that Western investors began to return to the precious metals sector, although both the price of silver and mining stocks still have a lot of catching up to do.

The factors mentioned have led to a certain "war premium" in the price of gold and pushed it to new all-time highs.

Despite the overbought market situation and the possibility of short-term corrections, especially in view of the upcoming US presidential elections, the overall uptrend remains intact.
However, a possible election victory for Donald Trump could initially lead to profit-taking and a short-term correction in the gold market, similar to what happened in 2016. In the long term, however, Trump's economic policy approaches, such as tariffs and tax cuts, could weaken the US dollar and fuel inflation, which in turn would support the gold price. Investors should therefore remain vigilant and consider possible corrections as buying opportunities, as the gold market has not yet reached all of its price targets and the fundamental drivers for a higher gold price still exist.

Our price target of "approx. 2,745 to 2,800 US dollars" was more or less met at 2,790 US dollars. We see the price of gold continuing to rise to at least 3,080 to 3,100 US dollars by next spring 2025. A possible setback to the range of around 2,600 to 2,625 US dollars could therefore provide another worthwhile entry in the coming weeks.