To The Moon

Gold $Gold - main 2412(GCmain)$ prices came under significant pressure following Donald Trump’s decisive victory in the 2024 U.S. presidential election. Over all, gold plummeted more than 9% since its new all time-high at USD 2,790 on Wednesday, 30th of October, 2024. This substantial decline came as no surprise as we had anticipated a wave of profit-taking in the gold-market. This sharp downturn was primarily driven by a surge in bond yields, a rallying stock market, and a strengthening U.S. dollar, all of which made gold less attractive to investors.

The market’s reaction to Trump’s win was largely influenced by expectations of his proposed policies, which many believe could reignite inflation. Concerns about potential tariffs and immigration policies led to higher growth and inflation expectations, pushing bond yields and the dollar higher. The 10-year U.S. Treasury yield rose to a four-month high of 4.46%, while the U.S. dollar appreciated strongly against a basket of other currencies. This combination of factors made non-yielding assets like gold less appealing to investors, as the opportunity cost of holding the precious metal increased.

Above all, however, the strongly overbought gold-market had simply needed a catalyst. Since its triple low at USD 1,615, gold was up 117.5% peak-to-trough over the last two years. Furthermore, since the last weekly cycle low at USD 1,810 and the spectacular rally over the last 12 months with a gain of more than 54%, gold was ripe for a breather and a pullback.

Gold in US-Dollar, Weekly chart

As gold has been selling off hard and without mercy, the last three candles have clearly brought a reversal on the weekly chart. In fact, from the new all-time-high at USD 2,790 prices came down to USD 2,535 within less than two weeks. Only at USD 2,535, some buyers showed up helping to create a little reaction in the gold price.

However, this shallow countertrend-bounce ended at USD 2,580 thus far and might create more question marks about the remaining bullish strength of gold at this stage. Actually, it is exactly this rather weak reaction on Thursday and Friday as well as the one potentially in the coming days that makes us rather very sceptic about golds immediate future.

Consequently, if there is no real bounce in gold, we have to expect the worst! That means gold should continue to drop like a stone until mid of December. Prices could easily continue to correct towards USD 2,450 and USD 2,400 or to the spring support around USD 2,300 and slightly below. Even a test of the fromer resistance and breakout zone between USD 2,075 and USD 2,200 is not completely out of question.

To be very honest, we would welcome a significant pullback in gold prices. Not only would this create an excellent opportunity to purchase physical gold at attractive prices, but it would also perfectly complete the 13-year-old cup-and-handle pattern. A retest of the previous resistance level between USD 2,075 and USD 2,200 would serve as the final confirmation before the real rally starts. From that backtest, gold could rally well above USD 3,000 in the next phase!

Gold in US-Dollar, Daily chart

On the daily chart, the recent sell-off in gold prices has been notably severe. The downward movement breached both the 50-day moving average (currently USD 2,651) and the lower Bollinger Band (currently USD 2,553), with bears successfully pushing the lower Bollinger Band downward. This price action strongly suggests a significant trend-shift in the short-term gold market dynamics.

Given these developments, a rapid reversal seems unlikely. The most optimistic scenario would involve a persistent sideways consolidation. However, considering the weak price action on Thursday and Friday, coupled with the fragile support of the trend channel around USD 2,550, it’s plausible that the current support zone between USD 2,535 and USD 2,550 may soon succumb to bearish pressure.

A realistic outlook would anticipate a pullback towards the rapidly ascending 200-day moving average, currently situated around USD 2,400. This level could potentially serve as a key support area in the near term.

Pullback into the last FOMC meeting in 2024

In conclusion, the gold market is poised for a significant pullback as we approach the last FOMC meeting of 2024. The recent sharp decline following Trump’s election victory, coupled with technical indicators and market dynamics, suggests that gold prices may continue to face downward pressure in the short term. This correction could potentially test support levels around USD 2,450 or even lower, providing an opportunity for investors to accumulate gold at more attractive price points.

However, this pullback should be viewed in the context of the larger bullish trend for gold. The potential completion of the 13-year cup-and-handle pattern, if confirmed by a retest of the USD 2,075 to USD 2,200 range, could set the stage for a powerful rally in the medium to long term. While the immediate future may present challenges for gold prices, the underlying fundamentals and technical setup suggest that this correction could be laying the groundwork for gold to potentially surpass the USD 3,000 mark in the next phase of its bull market.