Gold heats up with U.S. presidential elections less than four months away

(Kitco News,  Sat. July 20th. 2024) – Former President Donald Trump is now officially the Republican Party’s Presidential Candidate for the November elections. With less than four months to go, analysts expect geopolitical uncertainty to continue rising as political winds shift.

An assassination attempt against Trump over the weekend has boosted his chances of reclaiming his position in the White House. While a lot can happen in the next four months, analysts are starting to forecast what the global economy will look like during a second Trump Presidency.

According to a growing number of commodity analysts, gold should do well in the next four years. Trump has laid out a fairly clear plan to lower taxes and will not be afraid to use tariffs to impose his government’s will on global trade. Trump is also expected to pressure the Federal Reserve to keep interest rates low to support the economy.

Analysts have said that these three policies alone could have a significant impact on gold, as lower interest rates would weaken the U.S. dollar, lower taxes would increase the deficit, and increased tariffs would heighten geopolitical tensions.

Thorsten Polleit, Honorary Professor of Economics at the University of Bayreuth and publisher of the BOOM & BUST Report, said that he could see gold prices rise 10% to 15% by this time next year as he expects Trump to win in November.

Polleit isn’t alone in this view. In a note this week, Arslan Ali, currency and commodity analyst at FX Empire, said that Trump’s policy stance is seen as potentially inflationary and could weaken the dollar, increasing gold’s safe-haven allure.

While there is a renewed focus on Trump, President Joe Biden’s policies are just as bullish for gold. Biden wants to raise taxes to increase spending, so the deficit will continue to rise in either scenario, providing long-term support for gold.

Of course, some analysts don’t think that gold needs a president’s help in this rally as investors expect the Federal Reserve to cut interest rates in September. Markets see a more than 90% chance of a rate cut at the end of summer.

Chris Weston, Head of Research at Pepperstone, said that he sees potential for gold to hit $2,600 an ounce.

“Traders have seen that in three of the past four Fed easing cycles, gold has rallied strongly in the six months after they ease. Four cycles is perhaps not a huge sample size, but enough for some to front-run a potential re-run of form,” he said in a note.

As we said last week, it looks like gold’s rally is back on track, but we should also expect some volatility. Gold has fallen sharply from its all-time highs above $2,480 an ounce. This selloff may look extreme, but given how far prices have come, we should expect to see some profit-taking at critical levels.

Analysts have said that in this environment, support and resistance points will be tested, creating an element of uncertainty. Navigating these turbulent waters will take patience, and investors might keep their eyes on the horizon.

That is it for this week. Have a great weekend.

Jack Dempsey, President

401 Gold Consultants LLC

jdemp2003@gmail.com