In this chaotic and populist environment, gold remains an asset of choice. The precious metal is resisting the appreciation of the dollar and the rise in nominal and real US rates.
Donald Trump was credited with being a pacifist and avoiding military conflicts. The awakening is brutal. While Elon Musk galvanizes the far right in Germany and Great Britain, Trump threatens to take back the Panama Canal by force – commercial national security – if American commercial ships do not benefit from substantial passage discounts and the Greenland – geopolitical national security – if Denmark does not want to sell this territory, as well as to use economic force if Canada does not become the 51st American state. The great return of American imperialism/expansionism.
Greenland is an absolute necessity for Trump – arctic shipping routes and rare earths. Westerners and the current American administration are in shock. Would the United States attack Europe!? The unthinkable a few days ago becomes thinkable. For Donald Trump, everything can be bought or taken by force.
Putin reacted. An American Greenland would give a considerable, if not definitive, advantage to the United States with the Arctic shipping routes and industrial metals located there. Putin and his supporters said a Greenland taken by force would legitimize Russian expansionism to restore the USSR’s borders. This aggressiveness serves the interests of the Russians and the Chinese.
After 70 years of peace, we are entering a major trend in History that is less favorable and very conflictual. Major geopolitical changes are in sight.
NATO is truly at risk. During his first term, Trump required all NATO members to spend 2% of their GDP on defense. He was right, the NATO statutes require it. Germany was at 1.2%. Trump recently said that NATO member countries must significantly increase their defense budgets to 5% of their GDP. Even the United States is not there with its 3.4%. A threat to which Europeans will not be able to respond. The level of debt is high and ideologically, the military is not, for the moment, the priority of Europeans. In a recent poll, 78% of Americans believe that the United States should remain in NATO, convinced that NATO is essential for the security of the United States.
-Covid, the biggest pandemic since 1918, and the Ukrainian War, the first war in Europe since 1945, triggered high inflation. Throughout history, inflation has often favored regime changes, most of them populist.
Donald Trump would see himself as a Roman emperor, governing the country from his palace in Mar-a-Lago, Florida. Will he experience the fate of Diocletian, who reigned over Rome between 284 and 305? He too found himself confronted with a country angry with inflation, creating great social and political instability. Unable to curb the rise in prices, he opted for a general freeze on the prices of more than a thousand food and industrial goods. This solution ended in a resounding failure, pushing trade towards barter and ultimately destroying confidence in money.
Inflation has often guided the course of history.
Even if the economy is doing well, what matters is the feelings of the population and past experiences. When prices rise, the vast majority of the population believes that their purchasing power decreases and that companies take advantage of this to increase their profits. Who pays the bill? Companies with sacrifices on margins, employees with salaries that do not change or the State which compensates via debt? Will Trump solve the problem of inflation and purchasing power? Economists and the Federal Reserve fear a return of inflation with rising customs duties and the mass expulsion of immigrants. Throughout the ages, faced with the failure of remedies, populism is illustrated by a constant practice: designating those responsible for popular vengeance and massacring some of them.
In this chaotic and populist environment, gold remains an asset of choice. Gold is resisting the appreciation of the dollar and the rise in US nominal and real rates. Gold benefits from wars, deglobalization and dedollarization and central bank foreign reserves. Losing confidence in their economy, real estate and stocks, the Chinese are buying gold. Deglobalization is an inflationary process, favorable to gold.
- A new regime: uncertainties and volatility. In the short term, pressure on risky assets with the appreciation of the dollar and the rise in US interest rates.
- We are overweight the European defense sector which should experience annual profit growth of 25%-30% over the next 3 years.
- In 2025, the price of gold should exceed 3000 dollars
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