Gold prices dipped in European trading on Tuesday as a strong U.S. dollar and speculation over upcoming policies under President-elect Donald Trump weighed on the precious metal.

Following Trump’s election victory, renewed risk appetite reduced gold's appeal as a safe haven, while a surge in the dollar further pressured bullion prices. Spot gold has dropped from recent highs of nearly $2,800 per ounce over the past two weeks, with sentiment dampened by the strengthening dollar. The rally in the dollar is largely driven by expectations that Trump's potential inflationary policies may support higher interest rates in the longer term.

Economists suggest that Trump’s protectionist stance on trade, including possible tariffs on U.S. imports, could reignite inflation, which has been on a gradual decline. This week, the dollar soared to four-month highs, and Treasury yields, which move inversely to prices, climbed as well.

Investors are closely watching the upcoming U.S. consumer price data, which is expected to reveal persistent inflationary pressures in October. In addition, a series of Federal Reserve officials are set to speak in the coming days, offering potential signals on interest rates following last week’s 25 basis point rate cut.

Market sentiment is split, with traders pricing in a 66.7% chance of another quarter-point rate cut in December and a 33.3% chance that rates will stay unchanged, according to the CME FedWatch Tool.

JPMorgan analysts addressed the recent gold sell-off in a note, describing it as a "stumble, not a sea change." They noted that the sell-off was primarily driven by short-term position adjustments rather than a shift in long-term outlook. The analysts maintained their view that a Republican-led government could still drive gold higher in 2025, supported by concerns about currency devaluation and inflationary pressures.

(Sources: investing.com, reuters.com)