gold price retreats from record high amid rising inflation and election clarity

IG

Gold prices have declined after the US elections due to the resolution of the election results, which alleviated fears of a political deadlock. However, concerns about economic stability have been reignited by the latest inflation data from the US, potentially impacting gold's appeal.

The Federal Reserve's Stance on Monetary Policy

The Federal Reserve's stance on monetary policy may be shifting as inflation rose to 2.60% year-on-year for October. The core inflation rate remained steady at 3.3%, suggesting that the central bank may not be inclined to loosen monetary policy in the near term.

Geopolitical Tensions

Geopolitical tensions, particularly in the Middle East, are also contributing to the fluctuations in gold prices. Historically, periods of heightened uncertainty have led to increased demand for gold as a protective asset. The recent election results have reduced uncertainty for investors, allowing them to refocus on economic fundamentals. However, the shape of the new Trump administration and its economic policies remain uncertain.

Technical Analysis and Future Trajectory

From a technical analysis perspective, the gold market is eyeing the USD 2,500 mark as a potential support zone. The future trajectory of gold prices will be influenced by the Federal Reserve's monetary policy, interest rates, inflation, and geopolitical factors. Investors should remain vigilant and prepared for potential shifts in the economic landscape.

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