Donald Trump has swept and there is little doubt that he has not only taken the presidency, but that he now has total control of both chambers of the United States, so he will be able take their measures to the ultimate consequences. Rivers of ink have flowed about the consequences of this situation for the US and world economy, the stock markets of the entire planet, the debt… However, one of the reactions has taken the markets quite by surprise: that of gold.
The safe haven value par excellence is experiencing a full year for its prices. Geopolitical chaos, central bank purchases and interest rate cuts were lighting their way to historical highs, with an increase of 26% (which became 35%) so far this year. However, Trump’s victory has meant a clear break in this bullish path, with a drop of 6% since its October highs, when it reached $2,800 per ounce. Now the yellow metal is trading below 2,600 and analysts are trying to understand what is happening.
In the hours before the results were known, Ewa Manthey, an ING analyst, defended that, whoever won, there would be no changes for gold. “Gold will most likely perform strongly regardless of who wins as near-term geopolitical risks will remain high.” For his part, he recalled that in During Trump’s first stage, gold rose 55% therefore “we believe that gold’s positive momentum will continue in the short and medium term. The macroeconomic context will likely be favorable for the precious metal, as interest rates will fall and the diversification of foreign reserves will continue amid geopolitical tensions , which will create a perfect storm.”
Now there are more and more doubts about this situation. Carsten Menke, director of next generation research, Julius Baer comments that the reason why Trump and gold have not been right many times is that, although Trump has great arguments for the commodity, such as geopolitical doubts, the metal “came from a moment of excessive euphoria in the market“. All this added to the fact that the Republican “poses possible very bearish results for gold and other very bullish ones.” An example of this is that Trump’s tariff measures can generate “a positive impact on growth”, which would favor assets higher risk, such as equities, something that “explains the short-term falls.”
Menke defends that before the elections “the narrative was dominated by the most bullish ideas about gold that Trump could generate.” For a start “There could be concerns about rising deficits taxes and debt burden that calls into question the role of the dollar and favors gold.” It was also thought that Trump’s tariffs (particularly on China) would generate an economic blow that would cause a flight towards gold as a safe haven.
However, Julius Baer points out that there are many bearish scenarios that are taking shape, such as “a positive impact of Trump’s policies on the dollar” or “a resolution by Trump to end the war in Ukraine and unfreeze Russian assets in dollars, removing fears that the dollar will be used as a tool of sanctions.” In short, from the Swiss firm they believe that Trump brings a whirlwind of very diverse projections for gold, a great uncertainty that, in these days, has collided squarely with “excessive euphoria in the future.” So what is happening these days is a readjustment of expectations.
For their part, Zaner Metals points out that the very resolution of the elections in favor of one candidate or another represents a downward push for gold given that the markets ““they are undoing the geopolitical uncertainty that had been generated”. For its part, the movement of gold also goes hand in hand with a Fed with many more doubts regarding aggressive interest rate cuts.
Even though a cut is taken for granted at the December meeting, the Federal Reserve now appears to have a much more compiled scenario for cutting at will. By June 2025, the Swaps market bet involves a cut of just 50 basis points in the six meetings until then. Just a month ago the question was whether it could reach 125 points or if it would remain at 100 relegation points. These two options, which at that time were a toss-up, are now practically ruled out.
The main reason is that tariffs and other measures, such as tax cuts, will generate, in the opinion of many analysts, a rebound in inflation that will force the Fed to be cautious when it comes to lowering the ‘price of money’. “Trump’s policy plans spark more persistent rally of inflation expectations and even a pause in December could be justified”, comments from Danske Bank.
“The likelihood of tariffs being imposed relatively early in the Trump presidency and the resulting strong demand for dollars that this is creating is holding the key”
The higher the interest rates, the worse it is for gold. This raw material, by not offering income, loses attractiveness compared to a great rival among defensive securities, such as bonds, as Its profitability increases hand in hand with the ‘price of money’. The ten-year US bond continues to yield a significant yield of 4.36%, which has only increased with the rise of the Republican.
This, added to the revaluation of the dollar, is having a clear impact. “The likelihood of tariffs being imposed relatively soon “The strengthening of the dollar is affecting gold prices for the first time in months because it is also “is associated with increased odds that the Federal Reserve may delay its easing cycle.”
There are no long-term doubts
In any case, although analysts see a moment of chaos in the short and even medium term, few have any doubt about the fate of gold beyond, which involves continuing its rises and continue conquering record after record. Nanette Abuhoff Jacobson, Global Investment and Multi-Asset Strategist, Wellington Management, comments that “in any case there will be an environment of lower interest rates and purchases by central banks will continue.” The firm states that “we believe that gold prices will continue to be supported in 2025, as central banks implement cuts in official interest rates. These movements are usually associated with an increase in demand for this precious metal.”
JP Morgan himself explained after Trump’s victory that gold should appreciate in the long term even beyond what it would have done under Harris. “It will probably be reinforced by both tariffs as well as due to geopolitical tensions, as well as an expansive fiscal policy,” the North American bank stated in a note this Thursday.
Julius Baer also agrees given that “the long-term outlook continues to indicate higher gold prices, reflecting the multipolar world and the desire of emerging market central banks to become less dependent on the US dollar and, in an extreme casebe less susceptible to US sanctions”. The Swiss firm points out that “there is still a low proportion of gold in the foreign exchange reserves of many emerging market central banks, in particular the People’s Bank of China.” Therefore, “we consider that the purchases of central banks are the strongest structural force in the gold market” and the trail of the yellow metal will continue unstoppable despite the stoppage of these days.
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