Donald Trump swept and there is no doubt that he has not only assumed the presidency, but now has complete control of both houses of the United States, so he will be able to carry their measures to the ultimate consequences. Rivers of ink have been spilled on the consequences of this situation on the American and global economies, the entire planet’s stock markets, the debt… However, one of the reactions quite surprised the markets: that of gold.
The safe haven par excellence is having a full year for its prices. Geopolitical chaos, central bank purchases and interest rate cuts pave the way for historic highs, with an increase of 26% (now 35%) so far this year. However, Trump’s victory marked a sharp break in this upward trajectory, with it down 6% from its October high of $2,800 an ounce. Today, the yellow metal is trading below 2,600 and analysts are trying to figure out what is going on.
In the hours leading up to the release of the results, Ewa Manthey, an analyst at ING, defended that whoever wins, there would be no change for gold. “Gold will most likely perform strongly regardless of who wins, as near-term geopolitical risks will remain elevated.” For his part, he recalled that in During Trump’s first leg, gold rose 55% this is why “we believe that the positive dynamics of gold will continue in the short and medium term. The macroeconomic backdrop will likely be favorable for the precious metal as interest rates fall and diversification of foreign exchange reserves continues amid geopolitical tensions, creating a perfect storm.”
Today, doubts about this situation are increasing. Carsten Menke, director of next generation research at Julius Baer, comments that the reason Trump and gold have not been right repeatedly is that although Trump has a strong case for this raw material, such as geopolitical doubts, the metal “came from a moment of excessive euphoria in the market“. All this adds up to the fact that the Republican “poses some very bearish possible outcomes for gold and some very bullish ones.” An example of this is that Trump’s tariff measures can generate “a positive impact on the growth”, which would favor assets with higher risk, such as stocks, which “explains the short-term declines”.
Menke argues that before the election, “the discourse was dominated by the most optimistic ideas about the gold that Trump could generate.” For a start “We could be worried about an increase in deficits taxes and a debt burden that challenge the role of the dollar and favor gold. » It was also thought that Trump’s tariffs (particularly on China) would generate an economic hit that would cause a flight to gold as a safe haven.
However, Julius Baer points out that many bearish scenarios are emerging, such as “a positive impact of Trump’s policies on the dollar” or “a Trump resolution to end the war in Ukraine and unblock Russian dollar holdings, allaying fears that the dollar will be used as a sanctions tool. » In short, the Swiss firm believes that Trump brings a whirlwind of very diverse projections for gold, a great uncertainty which, in these days, clashed squarely with “excessive euphoria in the future”. So what’s happening these days is a readjustment of expectations.
For its 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 undo the geopolitical uncertainty that had been generated”. For its part, the evolution of gold also goes hand in hand with a Fed which is more doubtful about aggressive reductions in interest rates.
Even if a reduction is taken for granted at the December meeting, the Federal Reserve now appears to have a much more elaborate scenario for cutting at will. By June 2025, the swaps market bet involves a reduction of just 50 basis points over the six meetings between now and then. Barely a month ago, the question was whether it could reach 125 points or if he remained 100 points away from relegation. These two options, which were opposed at the time, are now practically excluded.
The main reason is that tariffs and other measures, such as tax cuts, will, in many analysts’ view, generate a rebound in inflation that will force the Fed to be cautious in will act to lower the “price of money”. “Trump’s policy plans spark more persistent recovery inflation expectations and even a pause in December could be justified,” comments Danske Bank.
“The likelihood of tariffs being imposed relatively early in the Trump presidency and the resulting strong demand for dollars is key.”
The higher the interest rates, the worse the situation is for gold. This raw material, by not offering income, loses its attractiveness compared to a major rival among defensive securities, such as bonds, such as Its profitability increases in parallel 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, has an obvious impact. “The likelihood that tariffs will be imposed relatively soon “The strengthening dollar is affecting gold prices for the first time in months, as it is also “associated with an increased likelihood that the Federal Reserve may delay its easing cycle.”
There is no doubt in the long term
In any case, even if analysts foresee a moment of chaos in the short and even medium term, few doubt the fate of gold beyond that, which implies continuing its rise and keep conquering record after record. Nanette Abuhoff Jacobson, global and multi-asset investment strategist at Wellington Management, comments that “in any case, there will be a lower interest rate environment and central bank buying will continue.” The company states that “we believe gold prices will continue to be supported in 2025, as central banks implement reductions in official interest rates. These moves are typically associated with an increase in the 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 the two tariffs as well as due to geopolitical tensions, as well as an expansionary fiscal policy,” the North American bank said in a note this Thursday.
Julius Baer also agrees, given that “the long-term outlook continues to point to higher gold prices, reflecting the multipolar world and the desire of emerging market central banks to become less dependent on the U.S. dollar and, in an extreme casebe less vulnerable to American sanctions”. The Swiss firm points out that “there is still a small 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 central bank purchases to be the strongest structural force in the gold market” and the drag of the yellow metal will continue unstoppable despite the shutdown these days.
