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Analysis of Gold Price Fluctuations Before and After US Election

After the November 6, 2024, US election results, international gold prices experienced significant adjustments. Trump was elected as the 47th president. London physical gold prices dropped by over 3% in a single day, falling below $2,700 per ounce. Domestic and international gold prices diverged, with Shanghai gold futures decreasing by 2% due to RMB depreciation's hedging effect, while London silver plunged 45% to $3,116 per ounce. Key reasons for the adjustment include: (1) reduced geopolitical uncertainty premiums post-election, (2) Trump’s inclination toward a "non-confrontational" foreign policy compared to Harris, and (3) short-term profit-taking pressures from overbought positioning. Historically, gold price adjustments following elections align with past patterns.

Meanwhile, the US dollar briefly breached 105, and the RMB depreciated to 7.20, consistent with Trump’s "domestic tax cuts, international tariffs, and immigration restrictions" policy leading to higher dollar and bond yields. By November 10, Bitcoin futures reached $810,000, while the probability of the Fed cutting rates in December fell to 65%, emphasizing the influence of Trump and Powell’s policy stances.

Understanding USD-Gold Correlation Before Election
One month before the election (September 18), after the Fed’s rate cut, a divergence occurred. Treasury yields surged amid rising Trump support, pushing up the dollar and gold prices (gold rose by over 9%). This correlation contradicted the traditional pricing framework. Short-term避险 demand suppressed gold’s financial attributes, driven by: (1) an "uncertainty premium" from election-related geopolitical risks, and (2) heightened避险情绪 due to escalating tensions in the Koreas-China border and Israel-Palestine conflicts. Similar patterns emerged during the 2022 Ukraine crisis and 2023 SVB crisis.

Gold Market Outlook
In the short-to-medium term,避险 demand and Trump’s policies influence gold prices. In the long term, direction depends on the Fed’s monetary policy, global growth, and the de-dollarization trend. Factors supporting gold include: (1) sustained Fed rate cuts stimulating gold outperformance, (2) ongoing central bank diversification away from US Treasuries, (3) US debt-to-GDP ratios reaching 123% in 2023, increasing concerns over national credit, and (4) a shift by major gold ETFs toward net gold accumulation since 2024. Though gold accumulated ~68% since October 2022, falling rates and other factors may limit corrections amid ongoing inflation and risk aversion.

Bond Market Performance
Over the reviewed week, 10-year US Treasury yields fell 7bps to 4.37%, with a 219bps inversion. Domestic bonds also weakened (10-year Chinese yields dropped 4bps), but fiscal policy shifts, such as the 2024 debt restructuring plan, suggest improved liquidity. Inflation data (CPI at 0.3%, PPI at -2.9%) indicated subdued economic activity, leading to bond volatility. Despite resilient equities, the bond market is expected to remain bullish heading into year-end.