Gold prices have been hammered this week, falling harder than they have in three years. The metal dropped over 5% to $2,568.20 per troy ounce, its sharpest weekly plunge since June 2021.
Just two weeks ago, gold was sitting pretty at an all-time high of $2,801.80 per ounce. Now, it’s down a brutal 8.3%, and investors are scrambling to figure out what went wrong.
The dollar, the Fed, and the Trump effect
Let’s start with the dollar. As Donald Trump’s win became undeniable, the greenback got a major boost. A strong dollar makes gold—priced in dollars—more expensive for international buyers, slashing its appeal. And that’s not all. Treasury yields skyrocketed, which pulled even more money out of gold. Why sit on a shiny metal when U.S. bonds are suddenly offering better returns?
Then there’s the Federal Reserve. Inflation data released Thursday wasn’t what markets wanted to hear. Jerome Powell, Fed Chair, confirmed it came in hotter than expected. Higher inflation should, in theory, be good for gold, but Powell wasn’t offering the lifeline traders hoped for.
Boston Fed President Susan Collins shut down the idea of a December rate cut, saying it’s far from guaranteed. “Higher interest rates kill gold,” one analyst quipped. No interest, no yield—it’s a bad deal for bullion.
And Trump? His economic playbook is shaking up everything. He’s bringing back protectionism: tariffs, tax cuts, and deficit-driven spending. Sure, it sounds like growth on paper, but it’s also a recipe for rising inflation and borrowing costs. Both are kryptonite for gold prices.
Profit-taking worsens the fallout
Profit-taking is the other big piece of this puzzle. Investors rode gold’s rally all the way to $2,801.80 just two weeks ago. But as soon as Trump’s win hit, the rush to cash out began. “After selling the top, investors are now selling the drop,” said BullionVault’s Adrian Ash.
The fall may look dramatic, but remember, gold is still up 19% year-to-date. Even a dip to $2,400 wouldn’t be catastrophic; it would simply bring prices back to their 200-day moving average.
Markets had priced in a closer race. When it became clear Trump’d won decisively, long positions in gold were liquidated at record speed. Investors, spooked by the sudden flip, dumped their holdings, sending prices into freefall. It’s a textbook case of reflex followed by rethink.
Gold wasn’t the only asset caught in the crossfire of Trump’s election victory. Bitcoin went on a tear, proving once again why crypto enthusiasts are cheering louder than anyone else right now.
Meanwhile, heavily shorted stocks like Tesla and Palantir saw massive gains. The Goldman Sachs basket of most-shorted stocks jumped 10% last week, its highest level in two years.
The S&P 500 didn’t escape unscathed though. It dropped 2% for the week, dragged down by mega-cap tech stocks struggling to find their footing. And while the index’s two-year bull market remains intact, this pullback is a reminder that not everything thrives under Trump’s economic vision.
Treasury yields are another story. The 10-year yield hit a four-month high of 4.4%, while the ICE U.S. Dollar Index surged to a two-year peak. Powell’s “no hurry to cut rates” isn’t helping. Investors are now evenly split on whether the Fed will even consider another quarter-point rate cut in December.
But the president’s trade policies could actually make gold appealing again. His tariffs targeting China and the EU are bound to disrupt global trade. That’s the kind of uncertainty that drives investors back to safe-haven assets like gold.
But don’t expect this shift overnight. The short-term pressures are too overwhelming right now. It’s also worth keeping in mind that gold’s fundamentals remain strong in the long run.
Market chaos extends beyond gold
The Goldman Sachs index of most-shorted stocks saw its biggest rally in years, fueled by a mix of retail FOMO and big-money bets on Trump-favored industries.
The Nasdaq 100 is back to levels last seen in early July, struggling to reclaim its former glory. Meanwhile, the S&P 500 has retraced to pre-election highs, with tech stocks bearing the brunt of the sell-off.
Even Friday’s 1.3% drop in the S&P 500 saw only two-thirds of all stocks decline, suggesting the pullback isn’t as bad as it seems on the surface.
That said, the market’s two-year bull run is still alive and kicking. Corporate earnings are broadening out, credit spreads remain tight, and above-trend GDP performance is keeping the Fed cautious but optimistic. In other words, the chaos is manageable—for now.
So, where does this leave us? The market is at a crossroads. Wall Street strategists remain skeptical. They’re still projecting average and median targets below current levels, signaling a lack of bullish conviction.
And while corporate deal-making and IPO activity remain sluggish, the expectation of a boom is growing louder. Meanwhile, Bitcoin was worth exactly $91,882 at press time.
