On Thursday, gold prices fell for the fifth consecutive trading day, extending the recent weak trend, with the latest quotations showing a drop to the lowest level in two months. The bearish market sentiment mainly stems from the heightened expectation that the Federal Reserve may continue to maintain a tight policy. This is compounded by the belief that if Trump succeeds in being re-elected and returns to the White House, global geopolitical tensions may ease, thereby weakening gold's appeal as a safe haven.
As the Federal Reserve's tough stance in the context of high inflation gradually becomes apparent, Chairman Powell recently reaffirmed the position of "not being in a hurry to cut interest rates," lowering market expectations for future rate cuts to a low point. Investors generally believe that the Federal Reserve's policy will lean towards maintaining high interest rates for a longer period, which undoubtedly poses significant pressure on gold prices. High interest rates usually diminish the attractiveness of non-yielding assets like gold because the opportunity cost of holding gold rises, leading investors to potentially shift towards higher-yielding assets like the dollar.
Additionally, the market also expects Trump's return to the White House could moderately ease geopolitical tensions. Although Trump's economic policies may be fraught with uncertainty, his foreign policy approach might be more moderate, which could help reduce the risk of political conflicts on a global scale. This prospect further weakens the demand for gold as a safe-haven asset. Gold demand typically rises during increased geopolitical tensions or economic uncertainty, but if future risks are anticipated to decrease, investors tend to shy away from gold in favor of higher-yielding investments.
Affected by this dual pressure, gold prices have been falling consecutively in recent days.
