Trump card: Gold prices set to shine amid US policy jitters
Gold prices are predicted to rise by over 6% in the coming three months following Donald Trump’s inauguration as US President, due to uncertainties surrounding US economic and political policies, according to local traders.
Hua Seng Heng Gold Futures (HGF) forecasts a 6.38% increase in gold prices within the first three months of Trump’s administration and a 3.3% rise over six months.
HGF’s research note indicates that historical data suggests gold prices are often buoyed by political uncertainties and expectations for a new president’s policies. During Trump’s initial presidency from 2017 to 2021, the association between Trump and uncertainty appeared evident, with gold showing resilience to such conditions.
During the initial term, investors were apprehensive about the ambiguities in political and economic policies. Trump’s America First approach and withdrawal from international trade agreements, including the Trans-Pacific Partnership, sparked concerns about global economic stability.
These uncertainties led investors towards safe-haven assets like gold to mitigate financial risks.
In his second term, Trump announced tax reductions for US businesses and the middle class, alongside infrastructure investments to boost the economy. While these policies may have long-term benefits, they have also raised concerns about increasing US public debt, contributing to rising gold prices, as stated by HGF.
In the first half of 2017, the US dollar weakened as financial markets remained sceptical about Trump’s ability to implement his proposed policies.
HGF notes that Trump’s confrontational foreign policies, including potential sanctions on China and Mexico and escalating tensions with North Korea, heightened investor fears of geopolitical risks, making gold an appealing asset.
Gold serves as an inflation hedge but its allure diminishes with higher interest rates. Trump’s extensive trade tariff policies are likely to spur inflation, potentially enhancing gold’s safe-haven appeal.
Yesterday, January 20, spot gold remained steady, increasing by 0.3% to US$2,711.29 per ounce, following an earlier 0.5% decline. US gold futures rose by 0.1% to US$2,752.40.
HGF anticipates gold price fluctuations this week, with a support level at US$2,680 per ounce. If this level is breached, the next support is at US$2,650. Resistance levels are projected at US$2,725 and US$2,740, reported Bangkok Post.
The local gold bar prices may also vary, with support at 43,850 baht per baht weight and a subsequent support range at 43,600 baht. Resistance levels are expected at 44,200 baht and 44,500 baht, according to HGF.
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