Gold falls to major trendline on USD strength, asset reallocation, risk-on

Gold falls to key support from a major trendline for the long-term uptrend at $2,600. 

A strong US Dollar is reducing the price of Gold, whilst competition from Bitcoin and stocks is also bearish. 

Expectations for the Federal Reserve slowing the pace of interest rate cuts and reduced safe-haven demand could also weigh on Gold’s price.

Gold (XAU/USD) trades at seven-week lows around $2,600 as it finds support from a major trendline on Tuesday. A stronger US Dollar (USD) puts pressure on the precious metal due to market perceptions that President-elect Donald Trump’s economic policies will be positive for the Greenback. Given Gold is mainly priced and traded in US Dollars, a stronger USD alone is often enough to bring down its price.

Trump’s pledges to impose tariffs on imports, reduce taxes, and deport millions of illegal immigrants are likely to push up prices in the US and drive higher inflation.  This would likely lead to the US Federal Reserve (Fed) slowing the pace of interest rate cuts as it tries to combat the resulting inflation. Relatively higher interest rates are negative for Gold since they increase the opportunity cost of holding the non-interest paying asset.