Donald Trump as the U.S. president has been very good news for the gold price – a deceptively continuous trade dispute with China and his tongue-in-cheek approach to diplomacy and governance have created the perfect environment for safe-haven assets.
Yesterday, gold adhered to the $1,900 level in jerky trading, with reasonable gains topped by a stronger dollar, but the yellow metal remained headed for its biggest weekly rise in eight weeks as Trump’s COVID-19 positive test upset risk sentiment.
As spot gold traded $1,900.40 an ounce, prices were set to rise 2.2% this week, heading for the biggest weekly percentage rise since early August.
Since Trump’s move to the White House on 20 January 2017, the price of the yellow metal has clambered from US$1,210 per ounce to an all-time high of US$2,063 in early August of this year.
But Trump alone isn’t responsible for gold’s price rally over the last few years. Whereas gold had a howered around the US$1,500 range before the pandemic, it was the Covid19-related global lockdowns that really thrusted it to record heights this year.
Would Trump’s second presidency be as beneficial for the yellow metal? It all depends what happens to the dollar (and other things). The US 2020 election is one of the most diverged in recent history, and political uncertainty is not good for the dollar.
The Fed has planted the seeds of inflation in the economy. Inflation by its nature devalues the US dollar, which ultimately benefits gold through the increased uncertainty it introduces.
During his four years of presidency, Trump has strongly advocated for a weaker dollar, arguing that a very strong dollar puts the economy and US businesses at a disadvantage. Again, weak dollar benefits gold price. In May, however, Trump changed his familiar buzzword, stating that “Now is a good time for a strong dollar.”
Analysts believe there’s still quite a bit more upside left in gold. Gold’s rally is expected to benefit the broader resource sector as well. Analysts contemplate Trump will go back to saying a weaker dollar is better for the economy. Trump loves to create uncertainty, and that undoubtedly helps the gold price. It would mean another Trump administration would be just as good for gold.