Trump’s attitude has taken a 180 degree turn! Gold dives from a high of $3500

1、 Event Review: From “Dismissal Threat” to “Unintentional Dismissal”

On April 23rd Beijing time, US President Trump suddenly changed his tone during a media interview at the White House, stating that he has no intention of firing Federal Reserve Chairman Powell and emphasizing that he hopes he will be more proactive on interest rate issues. This statement is in sharp contrast to his public criticism on April 17th that Powell acted too late and made mistakes, and that the earlier he left, the better.

Previously, Trump had been pressuring the Federal Reserve to cut interest rates for several consecutive days and hinted at the possibility of dismissing Powell, leading to heightened concerns in the market about the Fed’s independence. Bloomberg data shows that on April 21st, the daily inflow of funds into gold ETFs reached $1.2 billion, and the open interest contracts of COMEX gold futures surged by 15%, reflecting the extreme risk aversion sentiment. However, Trump’s “dovish” reversal quickly reversed the market trend, with the US dollar index rebounding 0.634% to 98.98 on the same day. All three major US stock indexes closed up more than 2.5%, and the Nasdaq China Golden Dragon Index surged 3.69%. Funds withdrew from the gold market on a large scale.

2、 Gold market volatile: $3500 historical high becomes a ‘one-day trip’

Affected by Trump’s remarks, the price of gold experienced a rollercoaster ride: On April 22, London spot gold briefly broke through $3500 per ounce, reaching a historical high, but then fell sharply by $130, closing at $3380.93, with a daily decline of 1.24%. April 23rd Asian session: Gold jumped short and opened low, hitting a low of $3289.09, a cumulative drop of 5.3% from yesterday’s high of $3500, and currently trading near $3310.

3、 Deep analysis of long short game theory

Federal Reserve Policy Expectations Shift

After Trump changed his stance, data from CME’s “Federal Reserve Watch” showed that the probability of maintaining interest rates in May increased from 85% to 91.7%, significantly reducing expectations of interest rate cuts. Federal Reserve Governor Kugler emphasized that “tariff policies have complicated the economic outlook, and the Fed needs to maintain independence,” further strengthening its hawkish stance.

The expected change in interest rates directly weakens the attractiveness of gold. As a non interest bearing asset, the holding cost of gold increases with the expected rise in interest rates, leading some investors to turn to yield assets such as US Treasury bonds.

The ‘siphon effect’ between the US dollar and the US stock market

The US dollar index rebounded to 98.98, reaching a new high since March, directly suppressing the price of gold denominated in US dollars. At the same time, the rebound of the US stock market has prompted funds to shift from safe haven assets to risk markets. The Dow Jones Industrial Average rose 2.66% in a single day, and the S&P 500 index recovered 5287 points. The rebound in risk appetite has intensified the selling pressure on gold.

Geopolitical desensitization and profit taking

Although the situation in the Middle East continues to be tense (Iran warned the six countries not to support the US military), and the front line of the Russia-Ukraine conflict escalates, the sensitivity of the market to geographical risks has declined marginally. In the medium to long term, the central bank’s gold purchases (over 1000 tons in 2024) and the trend towards de dollarization still provide strategic support for gold, but the short-term retreat of risk aversion has led to a price correction.

The dramatic shift in Trump’s attitude has caused a sharp fluctuation in the gold market, with the historical high of $3500 fleeting. In the short term, the strengthening of the US dollar, the rebound of the US stock market, and the hawkish stance of the Federal Reserve are suppressing gold prices, but medium – to long-term support factors still exist. Investors need to be wary of data shocks and policy variables. It is recommended to focus on short-term range operations and wait until the market direction is clear before making trend layouts.