Meanwhile Trump’s election to a second term has brought short-term volatility to gold prices. Historically, elections have had some impact on gold prices, but that impact disappears after a while as the markets digest what actions are actually being taken by the new administration.
Trump’s campaign was marked by several policies that could significantly impact gold, both positively and negatively. However, the uncertainty surrounding the implementation of these policies leaves us in a cautious and alert state.
For example, he proposed hefty tariffs that could increase inflation and/ or start trade wars. He has proposed deporting illegal immigrants, which could reduce the size of the workforce, slow growth, and increase prices. Trump has proposed cutting regulations, which can lead to bigger profits and higher stock prices. He has proposed cutting government spending, which could slow the economy but decrease the budget deficit and slow the growth in the national debt. He has also proposed tax cuts that might boost economic growth while increasing deficits.
It is impossible to know at this point which policies will be pursued, in what order, what compromises will be made, and whether the policies requiring legislation will get passed by Congress and held up in the courts. The possible outcomes cover an extensive range of impacts.
But the fundamentals that drive gold prices up are unlikely to change. Central banks, especially in BRICS countries, are likely to continue robust buying of gold. Geopolitical risks, like the wars in the Middle East and Ukraine or China’s global ambitions, are intensifying, not abating. The potential of AI will continue to grow, increasing industrial demand for gold as the necessary hardware is built.
Investor demand from economic uncertainty has played a key role in the rise of gold prices. Just think of the uncertainty that will come to the world’s largest economy in 2025 and what impact that might have on gold.
