Will gold gain lustre in wake of Trump’s election win?
Price falls as investors take profits from earlier gains, but longer-term prospects are bullish due to trade and inflation uncertainties
Demand for gold will continue to rise following Donald Trump’s victory in Tuesday’s US presidential election, which will increase trade tensions and uncertainties for the US dollar and US dollar-denominated assets, analysts said, predicting that gold prices will hit fresh highs despite a recent fall.
According to GF Securities, so-called “Trump deals” since the start of October took many expectations into account, leading to a strong US dollar, rising gold prices, falling oil prices, falling copper prices, and volatile US stocks, and the market was likely to trade in the opposite direction in the short term.
Shen Jianguang, chief economist at JD.com, said that in response to Trump’s election “virtual assets such as bitcoin and US bonds have risen sharply” and the price of gold would also climb in the longer term.
Shen said that reflected a broader decline in trust in the US dollar among governments and investors around the world.
“For many regions, particularly those with tense geopolitical relations with the United States, the status of gold, serving as a reliable safe-haven … store of value, is growing,” he said.
Gold has long been regarded as a hedge against economic and political uncertainty, particularly in a low-interest-rate environment. The price of gold hit a record high of US$2769.25 an ounce on October 29, having risen nearly 35 per cent this year. On Wednesday, spot gold dropped 3.1 per cent to end at US$2,659.24 an ounce.
In a report released last week, UBS forecast the price of gold would reach US$2,900 an ounce by the end of the third quarter next year, with a Trump victory to accelerate that climb given his views on tariffs, government spending, taxes and interest rates.
