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– Or, lingots
Is gold stalling? The price of the barbaric relic, which set a new historic record at almost $2,700 per ounce on September 26, has now erased all its gains made at the beginning of autumn. And from the point of view of technical analysis (analysis of the evolution of the prices of a financial asset and mathematical indicators in order to develop expectations on the future trajectory), the recent downward correction on the price of gold could continue in the short term, against a backdrop of a clear rise in long-term real rates (10-year rates less medium-term inflation expectations) in the United States. Indeed, as gold does not pay income, it logically suffers from unfavorable arbitrage when alternative reference assets such as government bonds yield more than before.
However, the underlying upward trend in gold is not in question at this stage. Many of the drivers of gold’s rise remain on: expectations of cuts in the Fed’s key rate (even if their probable magnitude has been revised downwards recently), purchases by central banks in the emerging world and rising tensions. geopolitical (gold is considered a safe haven, particularly against the risks of geopolitical or financial shocks)… In this regard, gold rocketed upward in January 1980 (after the second oil shock) and again in 2016 following to vote in favor of Brexit. And conversely, in the fall of 2020, the announcement of anti-Covid-19 vaccines were game changers having made safe haven values such as gold much less attractive, argues AuCoffre.com, a service for purchasing physical gold and silver online, questioned by Capital.
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The election of Donald Trump in 2016 had only a very brief impact on gold
A possible victory for Donald Trump next November would constitute a notable political event. But in light of what happened in November 2016, when Donald Trump won his first presidential term to the great surprise of the markets, the price of gold “had only benefited from it for a few tens of minutes, before falling again», recalls AuCoffre.com. Indeed, beyond certain worrying points of Donald Trump’s economic program, the financial community then chose to remember that in many ways, the Republican candidate was favorable to business and the trajectory of the financial markets. Under these conditions, the purchase of a safe haven such as gold did not seem appropriate, so much so that the price of an ounce fell gradually until mid-December 2016.
A victory for Kamala Harris against Donald Trump should not cause gold to react too much
Thus, we can assume that despite an economic program that is just as worrying (threats of large-scale customs duties, risks that a massive expulsion of migrants would have on the labor market, etc.) as in 2016, gold should not a priori not react too much to the announcement of a possible second Trump term. And if Kamala Harris were to win, gold should only a priori not react too much either, the Democratic candidate’s program is a continuation of the economic policy of the Biden administration.
A second Trump term should not permanently reduce geopolitical tensions
A new election of Donald Trump should not promote peace in the Middle East, according to AuCoffre. Thus, from this point of view alone, a second Trump term should not arouse expectations of de-escalation between Israel, Iran and Hezbollah, and therefore should not cause a marked fall in the price of gold. On the front of the war in Ukraine, if Donald Trump were to succeed in turning off the financing tap in kyiv, the financial community could bet on a victory for Russia and therefore an end to the war in Ukraine, which which could have a negative impact in the short term on the price of gold, judges AuCoffre.com.
The gold and precious metals specialist nevertheless believes that even in the scenario of a victory for Vladimir Putin (where Ukraine could have to cede a large part of its territory to Moscow), geopolitical uncertainties would remain. Indeed, in the event of Russia’s victory against Ukraine, fears could shift towards neighboring countries (Poland, Baltic States, etc.), the future of NATO would be in question (in the event of withdrawal of the States -united, the organization would be nothing more than an empty shell) and the European Union would be embarrassed and “facing up to one’s responsibilities», judges AuCoffre.com. In view of this likely continuation of geopolitical tensions in Europe, gold should therefore not really be attacked.
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How would gold react if Donald Trump implemented inflationary measures?
In his current campaign program, two measures envisaged by Donald Trump could in theory encourage a net increase in inflation, a phenomenon to which gold is traditionally sensitive. These are the massive customs duties envisaged (a trade war which would increase consumer prices) and the plan to send back millions of migrants (with constant job offers, a smaller workforce could give rise to tensions salaries). But it’s not that simple, judges AuCoffre.com.
In fact, such measures would deliver a shock to the American economy and therefore to household consumption. Faced with impoverished households, consumer prices are unlikely to really skyrocket, which puts the risk of wage pressures into perspective, argues AuCoffre.com. And if the American economy were to struggle, the Fed could be reluctant to increase its key rate. Ultimately, gold could retain its place within a diversified portfolio, judges the gold and precious metals specialist.
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