Investing.com — prices have plunged in the aftermath of the recent U.S. elections, with the market witnessing its worst post-election week since 1980. 

The yellow metal’s value dropped 6% in a single week, a sharp decline attributed to a confluence of factors, according to UBS analysts. 

The dramatic sell-off followed the election, which saw heightened expectations for U.S. economic growth and tighter monetary policy, leading to a surge in the U.S. dollar and a corresponding rise in long-term bond yields. 

UBS strategists say that this precipitous decline can be understood through three critical developments. Firstly, the spread between U.S. high-yield credit rates tightened significantly, and the (VIX) fell to its lowest since July. 

These shifts indicate a diminishing demand for safe-haven assets like gold as investor confidence in the U.S. economic outlook improved. 

Secondly, the U.S. dollar’s rally—spurred by strong economic data and expectations of fiscal stimulus under the new administration—created a headwind for gold, which traditionally has an inverse relationship with the greenback. 

Lastly, rising U.S. interest rates, tied to expectations of inflationary policies, further undermined gold’s appeal.

Despite the near-term pessimism, UBS maintains a longer-term bullish outlook on gold, suggesting that ongoing geopolitical uncertainties and dedollarization trends among central banks could reignite demand. 

The brokerage projects an end-2025 target of $2,900 per ounce, underscoring its confidence in the metal’s resilience amid a volatile economic backdrop.

For investors, UBS recommends a tactical approach, advising that dips in the gold market offer strategic buying opportunities, particularly as the price nears the $2,500 support level. 

They suggest maintaining a 5% allocation to gold in a balanced portfolio as a hedge against potential economic disruptions.

This fall marks a stark contrast to pre-election forecasts, where gold was expected to perform well regardless of the electoral outcome. 

However, as the dollar gains on “U.S. growth exceptionalism” rather than “risk-off” sentiment, gold’s traditional safe-haven status has been temporarily eclipsed.

By Paul Carsten

LONDON (Reuters) -Oil prices edged up on Monday after fighting between Russia and Ukraine intensified over the weekend, although concerns about fuel demand in China and forecasts of a global oil surplus weighed on markets.

futures were up 47 cents, or 0.7%, to $71.51 a barrel at 1230 GMT, while U.S. West Texas Intermediate crude futures were at $67.35 a barrel, up 33 cents, or 0.5%.

Russia unleashed its largest air strike on Ukraine in almost three months on Sunday, causing severe damage to the country’s power system.

In a significant reversal of Washington’s policy in the Ukraine-Russia conflict, President Joe Biden’s administration has allowed Ukraine to use U.S.-made weapons to strike deep into Russia, two U.S. officials and a source familiar with the decision said on Sunday.

The Kremlin said on Monday that any such decision would mean the direct involvement of the United States in the conflict, and accused Biden’s administration of escalating the war.

“Biden allowing Ukraine to strike Russian forces around Kursk with long-range missiles might see a geopolitical bid come back into oil as it is an escalation of tensions there, in response to North Korean troops entering the fray,” IG markets analyst Tony Sycamore said.

Saul Kavonic, an energy analyst at MST Marquee, said: “So far there has been little impact on Russian oil exports, but if Ukraine were to target more oil infrastructure that could see oil markets elevate further.”

In Russia, at least three refineries have had to halt processing or cut runs due to heavy losses amid export curbs, rising crude prices and high borrowing costs, according to five industry sources.

Brent and WTI fell more than 3% last week on weak data from China, the world’s second-largest oil consumer, and after the International Energy Agency forecast that global oil supply would exceed demand by more than 1 million barrels per day in 2025, even if output cuts remain in place from OPEC+.

China’s refinery throughput fell 4.6% in October from last year and the country’s factory output growth slowed last month, government data showed on Friday.

Investors also fretted over the pace and extent of interest rate cuts by the U.S. Federal Reserve that have created uncertainty in global financial markets.

Investing.com — Gold has recently performed as expected leading up to the U.S. election, but Societe Generale (OTC:) analysts suggest the precious metal may take a breather in the near term. 

Despite this, they see robust long-term drivers that reinforce the yellow metal’s unique role in financial markets.

“Gold is the ultimate ‘unknown unknown’ commodity,” Societe Generale stated, explaining that its primary value lies in its role as a hedge against unforeseen and unpredictable risks. 

Unlike most commodities, gold’s market dynamics are not influenced by typical supply and demand fundamentals.

“It is broadly speaking neither seasonal in its supply nor in its demand and is often considered the least commodity-like commodity market,” the firm stated.

According to Societe Generale, gold’s limited industrial use sets it apart from other resources, emphasizing its status as a store of value with a unique monetary role. 

“It is this monetary role that makes gold an alternative to fiat currencies and a stable store of value in unstable times,” Societe Generale explained.

The bank highlighted several drivers supporting gold’s current bullish momentum: persistent fiscal profligacy in the U.S., potential reversals in interest rate policy, the weaponization of the U.S. dollar in sanctions enforcement, and escalating geopolitical risks.

They note that investor sentiment has shifted significantly, with money managers, central banks, and ETFs turning bullish on gold simultaneously over the last quarter. 

Societe Generale emphasized that “sentiment on gold has converged with few sellers in sight,” solidifying its appeal as a hedge in uncertain times.

While a temporary pause in gold’s rally may be imminent, the firm believes its fundamental strengths and role as a safeguard against “unknown unknowns” ensure its continued relevance in portfolios.