The markets responded positively to theelection of Donald Trump to 47th president of the United States of Americaespecially regarding industries and Bitcoin. Above all, it is Elon Musk who is gloating, whose assets have soared, guaranteeing him a profit of 13 billion dollars in just one day since Trump’s victory.
But there is a market that has been negatively affected by the Trump effect: that ofgoldwhich recorded a slowdown of almost -7% after years of continuous growth. Gold had reached its maximum a few weeks ago, exceeding the $2,700 an ounce. Today it is around $2,550.
Deutsche Bank certifies that the precious metal’s performance was the worst compared to at least 13 other US presidential election windows. The reasons behind this trend are different.
The Trump recipe reassures the markets
“People only really care about gold when nothing else works“said Rob Haworth, senior director of investment strategy at Us Bank. “Stocks are doing well; solid returns are also seen for low-quality corporate credit securities. Under these conditions, we are less likely to seek alternative sources of portfolio growth.”
Bloomberg writes that Trump’s agenda, which includes tax cuts, financial deregulation and tariffs, is pushing hedge funds to invest in sectors that could benefit, such as big banks and domestic manufacturing.
Gold fever subsides
In practice, there is optimism regarding the performance of the economy and therefore we stop investing in gold, a classic safe haven asset in situations of uncertainty. Gold had gained more than 30% in the year before the US elections, setting records thanks to geopolitical and economic risks that had driven investors towards the good old yellow metal. But not only that: in addition to speculators, numerous states have also chosen to increase their gold reserves so as to create a buffer effect in the event of unforeseen economic events. Among the major investors are China, Türkiye and Poland, but not only. This new gold rush has literally made prices skyrocket.
But justifying the drop in the price of gold (which has currently lost -2.8 points) is also the strengthening of the dollar in the days following Trump’s re-election, since the metal is quoted in US currency. And the American economy, net of the suffering of the auto sector, seems to enjoy splendid health with decreasing inflation and the Federal Reserve which does not appear inclined to further lower interest rates.
“Considering the current strength of the US economy, going for gold would be a contrary choice,” commented Matt Miskin, co-head of investment strategy at John Hancock Investment Management. “At the moment, the perception is that there are few risks, both fundamentally and geopolitically. In such environments, it is difficult to go against the grain.”
However, some long-term uncertainties remain, given Trump’s unpredictable positions.
The Ukrainian knot
But also weighing on the downward trend in the price of gold as a safe haven are the perspectives on the war in Ukraine. Donald Trump will officially take office on January 20, 2025, but some details regarding his road map for peace between Ukraine and Russia have already been leaked. Trump’s plan for peace in Ukraine involves handing over all occupied territories to the Russians. If the proposal goes through, it will be a mutilated peace for the Ukrainian people. But this is enough to calm the markets about a war that has had important repercussions, primarily on theenergy and on that of the cereals.
