Last week, I wrote Gold Could Collapse or Challenge $3000 in November. This week’s election results support the former, and the odds now favor a pullback in gold to its 200-day MA (currently $2,400).
- Trump secured the election, winning the key swing states and taking the popular vote.
- The Republicans took the Senate and should preserve a slim majority in the House.
- These election results were the most bearish for gold (over the medium term) but will become bullish over time.
Gold’s Breakdown
The market response to Trump’s victory is reminiscent of 2016: gold prices fell sharply, accompanied by a surging dollar and rising 10-year yields. If the analog holds, metals and miners could remain under pressure into mid-December.
However, it’s important to note that when Trump won in 2016, Fed funds were between 0.25% and 0.50%, and the Fed just started a hiking cycle. Fed funds are much higher today, and the Fed is cutting. So, I don’t expect things to play out exactly as before.
It’s also important to note that in 2016, gold was at the tail end of a multi-year bear market. This time, the gold bull market is just starting – fueled by record central bank buying that is likely to continue into the foreseeable future.
US DOLLAR- The dollar rallied sharply after Trump’s victory, but it’s important to note that prices have been stuck between 100 and 106 for almost two years. A strong surge through 108 would confirm a breakout—otherwise, it’s approaching an important ceiling.
GOLD- Trump’s victory and Republican sweep were medium-term bearish for gold, supporting a pullback to the 200-day MA (currently near $2,400). To reverse this course and support more upside, gold must close above $2,760 quickly.
SILVER- Silver needs to close above $33.00 to prevent a deeper breakdown.
PLATINUM- Platinum must progressively close above $1,010 to prevent a deeper correction.
GDX- Miners had a good run, rallying over 70% in less than 8 months. Prices need to close above $40.50 to signal a bottom – otherwise, a pullback to the 200-day MA is likely.
GDXJ- Juniors must close above $51.60 to support more upside – otherwise, a retest of the 200-day MA is likely.
SILJ- Silver juniors must close above $13.70 to prevent a downside correction to the 200-day MA.
Conclusion
The election results will likely weigh on gold in the short term, with money moving out of safe-haven assets and into riskier, growth-oriented investments. However, under Trump’s presidency, we can expect expanding deficits and a weak dollar, which are long-term bullish. Gold must reclaim $2,760 in November to nullify the post-election breakdown and restore its bullish momentum.
AG Thorson is a registered CMT and an expert in technical analysis. For more price predictions and daily market commentary, consider subscribing at www.GoldPredict.com.
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