Gold and Silver Prices Pull Back

Gold Price and the Post-Election Pullback

Last week, we wrote that the gold price will remain in a long-term bull market regardless of which candidate won the U.S. presidential election. That is still very much the case, but there's no denying that it appears likely we've seen a short-term trend change in the days since the election result was posted. If you missed last week's post, here's a link. You might check it out if you're currently having doubts about the gold market fundamentals due to the pullback that began a few days ago.

Why Are Precious Metal Prices Moving Lower?

So, what is currently going on and why are precious metal prices moving lower? Well, first of all, you can plainly see on the chart below that something flipped shortly after the U.S. election results came in late last Tuesday.

Gold - 30 Minute Candlestick Chart

Why would the election of Trump have such a strong impact on the gold price? In my opinion, a few of the factors below are driving price lower:

• The idea that Trump will sharply cut U.S. federal spending and slow the exponential growth of both the debt and deficit.
• Many analysts seem to think that Trump's policies will promote economic growth and forestall the recession that some of us have been expecting for the past year.
• Trump's proposed tariff plan is likely to increase price inflation on several fronts. If it does, then it's likely that U.S. treasury rates will continue to move higher, dragging the dollar index higher along with it.
• If inflation persists and/or surges higher in 2025, what happens to the FOMC's expectation of as many as four fed funds rate cuts?
• Lastly, and this shouldn't be overlooked, Trump made multiple campaign promises regarding Bitcoin, and its price has surged to all-time highs since his election. A renewed bout of "buy bitcoin, sell gold" seems to be impacting the gold price too.

Assessing the Damage: Current Gold and Silver Trends

So, if you put all of that together, it becomes pretty clear why the gold price has fallen over 5% in just the past four trading days. With the damage done, the next and most pertinent question becomes: Where do gold and silver prices head from here? Let's start with COMEX gold. It has been in an easily-identifiable up trend since March 1. There have been higher highs and higher lows as price moved higher, supported by the 50-day moving average. Well, all trends (up or down) eventually come to an end, and our current, eight-month trend appears close to running its course. We should know more by later this week.

You can see the higher highs and support at the 50-day on the chart below. You can also see the moment, just when it looked perilous in June and July, price recovered and soon moved to new highs. Well, here we are again, and things look perilous once more. Price needs to stabilize soon and move back toward the 50-day, otherwise it risks a drop below $2620 and a break of that "higher highs, higher lows" pattern that typically defines intermediate-term bull markets.

Gold - Daily Candlestick Chart

Potential Correction Levels and End-of-Year Outlook for Gold

If price continues lower, then we're probably looking at a pullback that continues all the way down to the area around $2525-$2550 before consolidating into year end. In total, that would be about a 10% "correction" from the highs seen in late October, and as you've likely heard before, 10% corrections happen all the time during long-term bull markets. Additionally, if the gold price settles into that $2525-$2550 range at year end, it would still post an annual gain of over 20% for 2024, marking its best year since 2020.

COMEX Silver's Challenges Amid Dollar Strength

The picture for silver is equally challenging. It's also sharply lower since Trump's election with a drop of over 8% since last Tuesday. A rally in the U.S. dollar index is the chief culprit here as silver is down along with almost every other commodity over the past few days.

Silver - 30 Minute Candlestick Chart

U.S. Dollar Index - 30 Minute Candlestick Chart

Like gold, COMEX silver is also trading below its 50-day moving average. Unless it recovers later this week, it looks like it's headed back under $30 as it may not find solid support until it falls to about $29.50. From there, I would expect it to consolidate and firm up into year end with a goal of closing 2024 back above $30. Again, it doesn't have to work out this way and price may begin to recover later this week. However, we must all be aware of downside support targets whenever we hope to take advantage of price dips and add to our accumulating stacks of physical metal.

Silver - Daily Candlestick Chart

Leveraging Price Pullbacks for Gold and Silver Investment

In summary, while this election-driven pullback in gold and silver prices is frustrating, it was also inevitable, as no market, particularly the COMEX precious metals, moves continually higher without cleansing "corrections". The fact that we are currently experiencing such a pullback does not change the reality that the precious metals remain in a bull market and that market weakness can continue to be used as a "sale price" for more physical accumulation.

Now is the time to invest in gold and silver and take advantage of market pullbacks to strengthen your holdings for the long term.