08 Feb 2025
Daily Gold (XAU/USD)
Donald Trump’s renewed focus on tariffs could significantly influence gold prices. By increasing import costs to support domestic industries, tariffs often lead to higher consumer prices. This inflationary effect traditionally boosts gold’s appeal as a hedge against rising costs.
Analysts from Goldman Sachs predict that inflationary pressures caused by tariffs could prompt investors to allocate more funds to gold, thus increasing its demand. Should inflation accelerate in 2025, gold prices could see substantial upward momentum.
Will Tax Cuts and Deregulation Weaken the Dollar?
Trump’s proposed tax cuts and deregulation aim to stimulate economic activity. However, these measures could also expand the federal deficit, potentially weakening the U.S. dollar.
As the dollar weakens, gold typically benefits, becoming cheaper for investors using other currencies. Many market participants recall similar trends during Trump’s first term, when tax policies initially sparked optimism but later raised concerns about fiscal sustainability.
Experts at Morgan Stanley suggest that the dollar’s performance will likely be a critical driver of gold prices under this administration.
Could Geopolitical Risks Drive Gold Demand?
Trump’s assertive foreign policy approach has historically heightened global uncertainty. As a result, gold’s role as a safe-haven asset may gain importance.
During times of instability, investors often turn to gold for stability. The potential for increased diplomatic tensions could further increase gold’s demand. Analysts at J.P. Morgan forecast that gold could average $2,950 per ounce in 2025, with geopolitical risks being a key contributing factor.
Inflation, Fed Policy, and Powell’s Influence
Trump’s policies could create inflationary pressures, but how these intersect with the Federal Reserve’s monetary stance remains uncertain. Fed Chair Jerome Powell has indicated a willingness to combat inflation through higher interest rates if necessary, which could strengthen the dollar and put downward pressure on gold.
Historically, Trump has criticized Powell for being too hawkish on interest rates. Renewed clashes between the White House and the Fed could add volatility to the markets, influencing gold demand.
If the Fed opts for a tighter policy stance, it may hinder gold’s bullish momentum. However, if the Fed pauses or slows rate hikes, inflationary concerns could take precedence, providing a boost to gold.
Gold Prices Forecast After Trump Takes Office
With inflation risks, a potentially weaker dollar, and geopolitical concerns, the outlook for gold looks bullish under Trump’s policy agenda.
Traders should closely monitor inflation trends and Federal Reserve actions. Powell’s stance on interest rates and the dollar will be crucial in shaping gold’s trajectory during Trump’s presidency.
Gold’s rise in price can be attributed to a mixture of inflation fears, global political and economic instability, weakening of the U.S. dollar, and increasing demand from both central banks and private investors. The Trump effect, particularly his fiscal policies, long-term economic impact, and political influence, has contributed to the current economic environment that is favorable to gold’s rise. The combination of these factors suggests that gold may continue to perform well in the near term as investors seek refuge from economic uncertainty. Trump’s influence on the U.S. economy, the USD, and gold has been significant.
