(Kitco News) – While precious metals saw significant price declines following the reelection of Donald Trump, the longer-term fundamental drivers for gold remain favorable, while both gold and silver remain well-positioned technically, according to commodities analysts at WisdomTree.
“Donald Trump’s presidential victory had a resounding impact on global financial markets, leading to wide divergence across risk assets,” they wrote in the latest Commodity Monthly Monitor. “Commodities declined 0.7%, Bonds fell 0.7% while Global Equities rose 0.4% and Bitcoin soared 47.3% over the prior month.”
“The broad contours of Trump’s agenda are being reflected in asset prices, given the policies he pursued when he was last in office and his comments on the campaign trail,” they said. “What remains key are the specific policies that will eventually be implemented and their potential impact on the economy. Whether it is taxes, tariffs, deregulation, immigration, or the independence of the Federal Reserve (Fed), there remains considerable uncertainty around the sequencing of the policies that will be enacted by Trump.”
WisdomTree said that while 2024 “seemed poised to be the year when the inflation genie could finally be contained, markets are now grappling with the reflationary risks brought on by Trump’s victory,” and the “risk to market expectations for short-term US rates comes from the potentially inflationary impact of the new Trump administration’s policies (tax cuts, tariffs and immigration).”
The analysts acknowledged that precious metals underperformed across the board last month. “Gold came under pressure in the aftermath of Trump’s election victory amidst a stronger US dollar and a sharp rise in US bond yields,” they wrote. “Yet there are plenty of factors that remain supportive of gold. Expectations of higher inflation are likely to benefit gold as a hedge against inflation. Trump’s proposed tax cuts are anticipated to substantially increase the budget deficit, potentially exacerbating concerns about the creditworthiness of US public finances, thereby benefitting gold. Central banks in emerging markets are also likely to continue increasing the share of gold in their currency reserves, bolstering the case for gold.”
The analysts added that silver also came under pressure due to its high correlation to gold.
In their detailed precious metals analysts, WisdomTree noted that precious metal prices were pressured by higher bond yields and a stronger U.S. dollar following Trump’s re-election.
“US 10-year Treasuries hit 4.48% on 18 November, indicating market concern about the potential for deficits to grow under the new Trump Administration in 2025,” they said. “Bearing in mind that US 10-year Treasuries were as low as 3.62% in mid-September, this spectacular sell-off has been a strong headwind for gold. The US dollar basket at 107.55 has strengthened to the highest levels since 2022. That’s more than 3.5% appreciation in the span of a month. Fears of tighter trade policies from the US have driven the dollar higher. Despite these headwinds, gold has only fallen 1.2% in the reporting month.”
The analysts pointed out that gold has seen a moderate rally once again amid rising geopolitical tensions. “After Ukraine used US and UK sourced missiles against Russia, Russia retaliated with an experimental mid-range hypersonic missile,” they said. “Gold has recouped most of its losses since the Presidential election as a result.”
They also noted that silver prices have declined further than those of gold. “Silver is closely correlated with gold but has a higher beta,” they said. “Given silver’s more industrial use, it hasn’t rebounded as much as gold in recent days in response to the rise in geopolitical tensions.”
On platinum and palladium, WisdomTree pointed out that prices gave back the prior month’s gains after markets became skeptical that Russia will embargo PGM exports.
“In the prior month palladium rallied on the prospect of having global supplies tightened by Russia withholding exports,” they wrote. “However, markets appear to have changed their opinion on that risk. But as the Russian war continues its twists and turns, we are cautious not to rule anything out. Net speculative positioning on palladium futures is short and ripe for a covering rally should we get any news of restrictive supply. Internal combustion engine cars appear to be seeing better sales in Europe and US than previously hoped and may act as a boost for PGM demand. However, electric vehicle sales in China are accelerating and could temper this trend.”
Turning to the technical picture, the analysts noted that even with the post-election pullback, gold and silver are still well-positioned relative to other commodities.
“Despite silver falling 10% in the past month, its price is still 8.3% above its 200-day moving average (dma),” they noted. “Gold is trading 12.2% above its 200 dma, with its recent pullback not knocking it off the top three.”
