Gold prices have dropped to a 9-month low this week, trading below the $1,200 mark. The yellow metal is facing two major challenges now with rising interest rates and the Dollar. Initially after Trump’s surprising win, investors turned to Gold as a safe-haven asset but markets leaned away as the greenback continued to strengthen. Usually safe-haven assets like gold and yen suffer the most when the dollar advances.
The market is still rallying on Trump’s recent announcements on tax cuts, trade and domestic policies. Post US election Gold was hovering around highs of 1335, then the trend reversed dramatically and now we are seeing Gold trading at levels of 1187 wiping over 11% of its market value.
While the market is still pro Trump market economists are still expecting Gold to remain sluggish. Markets are almost 100% certain that The Federal Reserve (FED) will finally raise rates next month. Gold is very delicate to future rising rates as the metal doesn’t pay interest which reduces its demand. Overall the markets have been hitting new milestones and market confidence is sky high right now. Investors will question whether a real correction will happen anytime soon.
Can the US rally continue until the year end?