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How could the US elections and the Federal Reserve’s policy affect the price of gold in 2024?

INVESTINGHow could the US elections and the Federal Reserve's policy affect the price of gold in 2024?

Last week, gold plunged by over 50 dollars an ounce, only to bounce back. This was largely due to economic data from the US and its potential impact on decisions by the Federal Reserve. In the coming months, the upcoming presidential elections across the pond will also significantly influence the price of the precious metal.

It was a very tumultuous week for the gold market. The royal metal started on Monday 15th January exceeding 2050 dollars an ounce, only to fall to 2000 dollars on Wednesday, thus losing about 2.5% in value, and finish the week at just under 2030 USD/oz.

Why did this happen and what will influence the price of precious metal in the near future? As Michał Tekliński, gold market expert of, points out, several events could determine the exchange rate of the most valuable of precious metals.

– “2024 is the US presidential election year. In election years in the US, the process of selecting candidates and then the elections themselves always impact financial markets and the price of gold. Donald Trump has a very good chance of being elected in November, who last week, in the first closed primary of the Republican Party, won over 50% of all votes. This is a historical success, as no one had previously managed to exceed this limit in the first primary. Hence, it seems likely that Trump will once again be up against Joe Biden. However, the four accusations still weighing on him could hinder his race,” comments Michał Tekliński.

Trump and Artificial Intelligence under the spotlight in Davos

The topic of US elections and a potential second term for Donald Trump was also inescapable during the annual economic forum in Davos.

– “It turns out that American businessmen and leaders are not afraid of a potential Trump victory in the elections because they believe nothing consequential will happen if he becomes the US president again. There are a bit more concerns among politicians in Europe, which stems from a somewhat different approach to both political systems,” emphasizes the expert.

A report on global threats in the coming years is also published in Davos every year.

– “Over 11,000 participants of this survey from 113 countries, constituting 66%, indicated that the greatest challenges, which the global economy will face in the near future, will primarily concern events related to environmental protection. It is in this area that we can expect the biggest threats and so-called black swans, which can change the situation in the world,” forecasts Michał Tekliński.

The frequently mentioned point by the respondents (gaining over 50% of the votes) was technological development in particular, the progress of artificial intelligence. Conflicts were only brought in third place, scoring less than 50%. According to the survey participants, the focus must primarily be on resolutions and peaceful negotiations, which are the greatest guarantee for economic stability and peace in the world.

Will the Fed hold off on rate cuts?

The price of gold is always significantly influenced by the policy of the American Fed.

– “Decisions of the Federal Reserve have a fundamental impact on the royal metal. We saw it clearly last week. Such a strong decrease in the value of gold is the result of the publication of the results of the economic sentiment survey in the US in December 2023. Retail sales increased much more than analysts expected, which in turn led many market players to conclude that the economic situation is quite good. Consequently, contrary to earlier expectations, the Fed does not necessarily have to lower interest rates as early as March to avoid a recession,” explains Michał Tekliński.

If economic data continues to confirm the relatively good condition of the US economy, rate cuts may consequently be postponed.

– “The Fed plans three such cuts in 2024, and the market and analysts are even talking about five or six. Therefore, it is worth closely following financial data from the United States, as this is likely to be the critical point, not only for the price of gold but generally for the situation in financial markets in the coming year,” concludes the expert.

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