As Trump's chances of winning the U.S. presidential election continue to rise, the market is increasingly concerned about the potential inflationary pressures from his policies, pushing the dollar index to climb rapidly, while gold prices have plummeted, falling below the critical $2,700/ounce mark. At the time of writing, the dollar index rose by 1.76%, reaching 105.11, a one-year high; spot gold fell by 1.39%, at $2,705.45 per ounce, as the sharp decline in market demand for safe havens has heavily pressured gold prices.
Analysts point out that Trump's expected policies, including large-scale tax cuts and increased tariffs on imports, could raise inflation levels in the United States. This anticipation has not only supported the strong rise of the dollar but also brought new uncertainties to the Federal Reserve's rate-cutting plans. The market generally expects the Federal Reserve to cut interest rates by 25 basis points each this week and in December, but in the long run, the rate of cuts might be reduced due to inflationary pressures.
According to traders' bets, the Federal Reserve may stop its accommodative policy after cutting interest rates by 25 basis points twice in the first half of 2025, by which time the federal funds target rate range will be reduced to 3.75%-4%. Analysts believe that if Trump's policies indeed lead to higher inflation, the Federal Reserve may choose to slow the pace of rate cuts to avoid overheating the economy.
Moreover, the Federal Reserve's rate decision to be announced this week will become the focal point of the market, with investors hoping to gain more guidance on future monetary policy through this decision. In terms of gold, technically, $2,700 is shown to be a key support; if it breaks this level, gold prices may explore further downward.
