Trump Effect: Gold Price Down By Nearly Rs 6,000 Since US Election — Experts Share Key Levels

Indian gold futures on the Multi Commodity Exchange have slipped by 6.5% or nearly Rs 6,000 since Donald Trump's decisive victory in the US presidential election.

Trump's win has pushed the US dollar to a one-year high, and led to a sharp uptick in the 10-year Treasury yield. Gold, which shares an inverse relationship with the dollar and bond yields, has been sliding since then.

Spot gold has shed more than $200, as it slipped from a high of $2,750.01 per ounce on Nov. 5—the US election date—to a low of $2,536.9 an ounce on Nov. 14. On Friday, the metal was trading 0.1% higher at $2,567 at 10:35 a.m. (GMT).

The Indian gold futures on MCX, whose movement is usually dictated by the global rates, have similarly plunged over the past 10 days. The December contracts dropped from a high of Rs 79,181 per 10 gram on Nov. 5 to a low of Rs 73,995 per 10 gram on Nov. 14. The MCX was closed on Friday on account of a public holiday.

The major trigger for the gold prices, in the period ahead, will be the path to be adopted by the US Federal Reserve, experts said. If the American monetary policy accelerates its pace of cuts in the benchmark lending rates, then gold prices are expected to rebound, they said.

If the Fed slows down its planned rate cuts in view of inflationary pressures, then gold prices may face further volatility.

Notably, the lowering of lending rates augur well for gold. The metal's bull run in September and October was powered by the 50 basis points rate cut announced by the Fed in September, and its indication towards more rate cuts in the months to come.

Key Gold Price Levels

Following the recent plunge, gold prices have support around the crucial level of Rs 72,800 per 10 gram on the MCX, said Rahul Kalantri, vice president for commodities at Mehta Equities Ltd.

"We are expecting gold prices might jump from this level and go towards Rs 74,000 per 10 gram and possibly Rs 74,300 per 10 gram," he said. "However, a daily close below Rs 72,800 (per 10 gram) would signal a bearish shift and could lead to further declines."

This week, data released by the US showed consumer price index-based inflation rising by 2.6% year-on-year in October. Though in line with estimates, it was sharper than the inflation of 2.4% in September.

Apart from the uptick in inflation, the shrinking of unemployment rolls, as per the data released by the US on Thursday, may also compel the Fed to rethink its strategy of rate cuts, analysts said. The initial jobless claims fell to 217,000 in the week ending Nov. 9, as compared to the estimate of 222,000, the data showed.

Gold prices continued their downward trend throughout the week and "may face additional selling pressure" if the US economy grows stronger-than-expected, said Kaynat Chainwala, assistant vice president for commodities research at Kotak Securities Ltd.

In this backdrop, the support level for gold on MCX is seen at Rs 73,000 per 10 gram, whereas the key upper level price to watch out is Rs 75,350 per 10 gram, she noted.