Could the gold rally recover from the Trump speed bump?

Gold prices went through a significant drop over the past week, falling to near two-month lows as the US dollar strengthened and market optimism grew in anticipation of a second term for President-elect Donald Trump.

But despite the short-term selloff, at least some voices insist inflationary pressures and other factors will ultimately prevail to drive gold's long-term appeal.

On Tuesday, spot gold was down 0.7 percent at $2,600.93 per ounce, following a 1 percent drop earlier in the day to its lowest level since mid-September, according to Reuters. US gold futures also dipped, settling 0.4 percent lower at $2,606.30.

Meanwhile, the dollar index hit a four-month high, making gold more expensive for holders of other currencies. Yields on US Treasuries rose alongside bitcoin prices, powered by investor speculation of a more crypto-friendly regime under Trump.

Daniel Pavilonis, senior market strategist at RJO Futures, sees gold's recent struggles as "just a corrective move in a longer-term bullish market.”

“If we see another wave of inflation coming, then that should drive gold higher,” he told Reuters.

Market observers are also closely watching for key US economic indicators this week, including October’s consumer price index and scheduled remarks from Federal Reserve Chair Jerome Powell. Last week, the Fed cut its benchmark interest rate by 25 basis points to a range of 4.50 to 4.75 percent, but Trump's victory at the polls places some question marks over the timing and magnitude of future rate reductions.

Carsten Menke, an analyst at Julius Baer, noted that while immediate growth optimism has dampened gold’s allure as a haven, broad global trends still tip the scales in gold's favor over the long term. “[The] desire of emerging market central banks to be less dependent on the US dollar… still point to a longer-term rise in gold prices,” he said.

In a separate conversation with Barron's, Taylor Krystkowiak, investment strategist at Themes ETFs, highlighted multiple factors aligning for a potential gold rally.

“Why does gold go up? It’s geopolitical uncertainty, it’s deficit spending, and it’s inflation,” he stated.

Citing a widely shared concern in the bond space, Krystkowiak highlighted the fact that Trump’s economic policies, including proposed tariffs and expanded tax cuts, could exacerbate inflation risks, strengthening the case for gold as a hedge.