GoldPrice.

At the wrap of what has been arguably the most consequential news week of 2024, gold prices are trading at a notable loss compared to Monday's open but still look surprisingly stable.

So, what kind of week has it been?

Gold trading is netting out to a surprisingly steady week for spot prices, given that in the last five days, we've traded through a key FOMC meeting as well as what may turn out to be one of the most consequential US General Elections in modern history. Despite the tumult in the real world, gold's late-week slide now looks to only cost -$20/oz, after the post-election parachute drop in prices has been mitigated by the Fed's comparatively serene announcement of a 25-basis point reduction in FOMC policy rates.

You have no doubt been steeped in just as much discussion of the election's impact on financial markets over the last 3 sessions. So, rather than bombard you with more of the same, we'll use today's recap to touch on the looming questions of policy and planning by the forthcoming administration which could have the strongest impacts on gold trading in the near- to medium-term path ahead.

Tariffs & "Trade War"

The hottest topic that has gained the most increased attention and speculation since election day is the question of how the 2nd Trump administration will attempt to carry out the campaign promises of re-instituted and raised import tariffs to be levied against China and, potentially, other major US trade partners. The restructuring of industrial and commercial activity that would result from even a half-measure of this kind of trade policy will be unlikely to directly affect the gold market, given that the yellow metal is generally not an industrial commodity. Instead, gold will be impacted by these policies through its reaction function against the US Dollar. The textbook expectation is for the dollar to strengthen considerably against a basket of its most common trading partners, which itself should drive market headwinds against gold. At the same time, however, if this new state of play were to pressurize and destabilize US industry (or similar sectors in other G7 economies), the resulting geo-economic uncertainty could create a much deeper risk-off attitude for global markets that would benefit gold as a play for safety.

Federal Reserve Leadership & Monetary Policy

The president-elect has not been shy about his desire to see interest rates lowered faster, his general dislike of sitting Fed Chair Jerome Powell, or his willingness to remove him from command. (Whether that would be reasonably doable is a separate question, especially now that Powell has specifically said that he won't just concede his seat if "asked" to.) This means that for at least, let's say, the first half of 2025, there will be a whole new component to predicting the Fed's near- to medium-term policy path. The reaction function for gold will be expected to remain the same. An increased likelihood of the FOMC accelerating their pace of rate cuts towards "neutral" (or beyond) will continue to be a bullish indicator for the precious metal—now there will be potential and speculation for whether such a shift could come from executive branch pressures.

Paradigm Shifts for US Dollar and Treasury Markets

Any quick look at the US Treasury yield curve this week will show that the bond markets are still sorting out their feelings and expectations for the next administration and a primary mechanism through which alterations to the state of trade or monetary policy will impact the gold market is its typically inverse relationship to US Dollar strength. With so much of the GOP's campaigning (outside of identity politics) focused on "fixing" the US economy, there are myriad other policies the incoming administration and legislature could (attempt to) put to work that could have sharp impacts on US Treasury paper or the Greenback and, in turn, on the gold market. The problem from this vantage point is that it's far too early to know what those policies will turn out to be or what impact they could have.

Who Knows What Else, Really?

Which brings us to our final point. Large phases of the first Trump administration were characterized by a deep uncertainty about what came next, and even with those four years of experience, the market and investors appear just as uncertain now about what the next four years—even the next four months—could bring to financial markets and geopolitics.

For the more immediate future, we look to next week, where the primary macroeconomic data point will be Wednesday's update on consumer inflation metrics, which could provide an opportunity for gold to regain footing above $2700/oz—or else push the metal's spot pricing lower as we cross the halfway point of November.

In the meantime, traders, I hope you can get out and safely enjoy your weekend for the next couple of days. After that, we'll see you back here next week for another market recap.