Gold's Tumultuous Dance with US Elections: Resilience Amidst Rising Yields

Gold's impressive rally sees a setback post-US elections due to stronger bond yields and a rising dollar. Despite short-term pressures, long-term support remains strong from factors like rising protectionism, Asian market demand, and concerns over high equity valuations.

The robust rally of gold since the start of the year has hit a temporary snag following the United States election results, as pointed out by a report from the World Gold Council. Factors such as stronger bond yields, a strengthening US dollar, and increasing investor confidence in stocks and cryptocurrencies have slightly cooled gold's trajectory.

The election outcome has also alleviated certain geopolitical tensions, potentially diminishing gold's role as a safe-haven asset. Prior to the election, there was speculation that US Treasury yields and the dollar had reached their peak, with a weaker dollar anticipated to drive yields down.

However, the election brought about a swift reversal in these trends. The dollar surged while the euro and yen declined sharply, and bond yields spiked, fueled by expectations of inflationary policies—such as tariffs, tax cuts, and infrastructure spending—that could elevate government debt and spur inflation. The heightened bond yields reflect investors' demand for better returns on US Treasuries, while the incoming administration's pro-crypto stance has buoyed cryptocurrency interest.

Moreover, equity markets, notably tech stocks, received a boost from the expectation of business-friendly policies. Although these factors pose challenges for gold, the metal retains support from key Asian markets where demand remains high.

Amidst China's declining CSI300 index and US inflationary policies, gold demand could find additional support. The persistent fiscal measures are anticipated to add inflation pressures, bolstering the rationale for holding gold. In the broader picture, despite short-term obstacles from the US election results and increasing yields, gold maintains resilience underpinned by enduring concerns.

Rising protectionism, elevated stock market valuations, and the limited role of cryptocurrency as a gold alternative highlight a favorable setting for gold in the long run. Although the metal is taking a temporary breather, it is likely to remain a vital asset for investors in a world facing rising inflation, geopolitical tensions, and concentrated stock market dynamics. (ANI)

(With inputs from agencies.)