Gold and silver prices have pulled back from recent highs as the US dollar continues to hold up and traders take advantage of the latest price rally.
After setting a new USD high of $2,958.02 on Tuesday’s market opening, gold has dropped below $2,900 each day since as bears and bulls drag the price up and down. With gains for the month still up 4.5% however alarm bells aren’t ringing just yet, and it remains to be seen whether gold will continue to fall, consolidate around $2,900 or push higher.
This is far from the first dip in the latest gold rally, and so far they have typically lasted a few days before the metal pushes higher once more.
The US dollar remains relatively strong since the US election results, and the US dollar index is up more than 5% in the past 6 months. Inflation remains sicky in the US (and around the world) and rate cut hopes remain low at the moment, with a cut not expected until June at the earliest according to the CME FedWatch Tool.
With gold hitting new all-time highs, and still up 40% in the past year in USD, it is also unsurprising that the metal faces selling pressure from those looking to profit from trades made even relatively recently. Jewellery demand in India and China (two key sources of demand for gold) have also reportedly dropped given gold’s record high prices.
Shortages at the Bank of England remain however, and demand from investors has not abated. If anything, the price dips this week have only provided a further buying opportunity for those looking to add more gold to their portfolios.
Gold also remains firmly in the minds of the US President. Donald Trump and Elon Musk have stated they intend to visit Fort Knox to personally audit the gold reserves held there. There have long been claims of gold being removed from Fort Knox, despite assertions of annual audits. Trump said in a press conference “we want to see if the gold is still there.” No timeline has been given as yet, but the results of the visit will be eagerly awaited by those who have claimed the gold in Fort Knox is gone.
There has also been speculation of Trump updating the value of the US’s gold reserves. The US holds 8,133 tonnes of gold, but it remains valued at the 1973 valuation of just $42 per ounce. With gold hitting new highs above $2,950, this represents a significant undervaluation that Trump could look to correct. Revaluing those reserves would be a windfall of hundreds of billions of dollars that could be used to renegotiate US debt or even potentially sold to repay some of that debt.
While unconfirmed, the audit and potential revaluation could have a profound impact on the gold market, and at the very least continue to see gold in the headlines. Trump’s concern over the US gold reserves only further cements it’s importance as a strategic asset for any portfolio.
