Gold prices tumbled nearly 3.5% Monday, ending a rally that led the markets to retrace most losses sustained following the U.S. election.
Futures for December delivery traded at $2,647 an ounce, a drop of $64 on the day, and silver futures surrendered $1.27 an ounce to trade in the $30.15 range.
Rotating into Bitcoin?
Experts appeared to be mixed on what caused the sharp Monday drop, with some speculating it is a technical move after a multi-day rally while others suggest it could be a rotation of money away from gold and into Bitcoin, which has surged since Donald Trump’s presidential victory.
George Milling-Stanley, of State Street Global Advisors, told CNBC, “Bitcoin, pure and simple, it’s a return play, and I think that people have been jumping onto return plays.”
He went on to suggest Bitcoin was in some ways designed to take away from gold, due to the use of the term “mining” in its operations.
“They wanted to seem like gold — maybe take some of the aura away from gold,” he said. “I have no idea what’s going to happen over the next 20 years, except it’s going to be a fun ride. I think that gold is going to do well.”
Bessent effect
Other investors suggested Donald Trump’s recent nomination of Scott Bessent as Treasury Secretary could have quelled some of the safe haven play many traders were eyeing.
“Some market participants see him as less negative for a trade war, considering his comments on a phased approach for implementing tariffs,” Giovanni Staunovo, UBS Group commodity analyst, said to Yahoo Finance.
Jun Rong Yeap, a market strategist with IG Asia, told Yahoo, “Prices continue to reflect the interplay between geopolitical risks and a less dovish outlook from the Federal Reserve.”
CME FedWatch
Despite the United States’ assuredly massive change in policy quickly approaching when Trump takes office in January, traders have yet to make huge moves in the bond markets.
According to CME FedWatch, investors are pricing in a 55.6% chance of a quarter-point rate cut, with 44% suggesting there will be no move at the December meeting of the FOMC.
Fed Chairman Jerome Powell has suggested he would not be susceptible to making interest rate decisions based on pressure from a new administration.
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