Will Trump push ‘smart haven’ gold to record highs this quarter?

Gold prices could hit record highs this quarter, driven by a perfect economic storm orchestrated by Donald Trump.

Gold could well get a Trump-fuelled boost in Q1. Pic via Getty Images

Gold prices could hit record highs this quarter, driven by a perfect economic storm orchestrated by Donald Trump.

As he begins his second term, his sweeping policies are setting the stage for a dramatic economic shift that, I believe, is bound to ignite inflation once again. And when inflation roars, so does gold.

Trump’s policy arsenal – ranging from aggressive tax cuts to protectionist trade strategies – is poised to flood the US economy with cash while raising costs for imports. The result? A potent cocktail of rising prices and an eroding dollar, creating the perfect environment for safe-haven assets like gold to thrive.

The first signs are already here. Spot gold climbed 0.6% to $2,724.74 per ounce early on Tuesday, extending gains from the previous session. By Thursday bullion pushed past US$2750/oz, around US$40 off record highs.

The US dollar, meanwhile, stumbled about 1% on reports that new taxes might be imposed “in a measured way”. 

While that’s calming Wall Street’s nerves in the short term, the broader implications for inflation are seismic. A weaker dollar not only makes gold more attractive to foreign buyers but also signals cracks in the US economic fortress.

Trump has long championed policies that, while politically advantageous, often run counter to economic orthodoxy. 

His commitment to America First trade policies has alienated key trading partners and spurred retaliatory tariffs. 

These measures inevitably raise prices for consumers and businesses alike. And let’s not forget his spending plans – an infrastructure overhaul of unprecedented scale, defence spending hikes, and potential tax incentives to boost domestic manufacturing. These initiatives are inflationary by design.

What about China?

Then there’s China. Beijing’s growing pivot toward gold and away from the dollar is set to exacerbate these trends. 

Already the world’s largest gold consumer, China has been steadily increasing its bullion reserves, a move seen as a strategic shift to reduce dependence on the greenback. This development could undermine the dollar’s status as the world’s reserve currency, further eroding its value and bolstering gold’s appeal.

China’s motivations are clear. Trump’s combative trade stance has made dollar assets less attractive to Beijing. 

Add to that the spectre of US sanctions and the geopolitical chess match over Taiwan, and it’s no surprise that China is doubling down on gold. This tectonic shift in global reserves is likely to amplify the already bullish momentum for bullion, potentially pushing prices to record highs this quarter.

The takeaway is simple: gold is not just a safe haven; it’s a smart haven. As inflation heats up and the dollar weakens, the yellow metal offers a hedge against economic uncertainty and a depreciating currency. In fact, some analysts believe we could see gold soar beyond $3,000 per ounce in the near term if Trump’s policies continue on their current trajectory.

This isn’t just about economics; it’s about psychology. Trump’s erratic policymaking style, combined with his penchant for defying conventional wisdom, injects a level of unpredictability that markets detest. When investors feel jittery, they flock to assets that promise stability. 

Critics might argue that inflation fears are overblown, pointing to the Federal Reserve’s ability to intervene. But the reality is that Trump’s policies are designed to test those limits. 

Massive fiscal spending and trade disruptions are variables even the Fed may struggle to counteract effectively. The result? An inflationary spiral that could fuel an extended bull market for gold.

Trump’s policies may promise to Make America Great Again, but for gold investors, they’re delivering something perhaps even better: record-breaking returns.

Nigel Green, is the group CEO and founder of deVere Group, an independent global financial consultancy.

Originally published as Will Trump push ‘smart haven’ gold to record highs this quarter?