Buyer's remorse

Buyer's remorse - the regret felt after buying into something or someone - has struck the UK. A recent opinion poll found that 41% of Britons think they are worse off since the Labour government took office in July this year. Prime Minister Keir Starmer's personal approval rating is no more than 23%, with 52% holding an unfavorable view of him.The net approval rating of the Labour government in July was -2% but now is about -36%; that of the previous Conservative government was -56% just before July's general election.

That remorse may soon be hitting the US too. In the US a Harris poll of around 2,000 adults conducted this month found that 69% think that one of the incoming President's key economic policies - tariffs on imports from Canada, China and Mexico - would lead to higher prices. The Peterson Institute for International Economics estimates that Trump's proposed tariffs would cost American households more than $2,600 a year. High tariffs, says the institute, "imply a massive shifting of the tax burden from rich taxpayers toward lower-income Americans."

Gloom is also abroad in the European Union (EU). Business sentiment according to the European Round Table for Industry (ERT), a collection of leading industries that account for a combined annual revenue of €2 trillion, has dropped from 58 in the first half of this year to 47 in the second half - anything below 50 represents a shift from optimism to pessimism. The EU is struggling to emerge from a stagnated economy. Growth is expected to be a meager 1.5% in 2025, after coming in at less than 1% this year. French business sentiment is weak, thanks to political uncertainties, and Germany - the EU's industrial powerhouse - is on the brink of recession following two years of stagnation. Germany too is facing political upheaval. Its fragile governing coalition collapsed this month.

Interest rate cuts on hold

Precisely what Donald Trump will do once in the White House is unclear. One of his strengths (and weaknesses) is that his inherent unpredictability keeps everyone guessing.

But if he is true to his word and increases the tariffs on imports that will certainly stoke inflation - importers are most likely to pass on the higher cost of imports to the consumer. Paradoxically a President who was elected by disgruntled voters cross at higher prices may well reinvigorate inflation, which has been coming down. Against that Trump and his nominee for Treasury Secretary, Scott Bessent, argue that import taxes can boost federal revenue and help protect US jobs.

This uncertainty about tariffs and their possible boost to inflation is one reason that the Federal Open Market Committee (FOMC) may well not cut US interest rates further at their 17-18 December meeting. The possible pause would leave rates at 4.5-4.75% Inflation is still above the Federal Reserve's 2%/year target. At its 6-7 November meeting - just after Trump's electoral triumph - the FOMC's minutes (published later) reveal that although inflation had been easing there was no hurry to cut rates further, given the relative strength of the US economy.

Implications for gold

For the past couple of years gold, traditionally seen as a defensive asset against inflation, has belied that reputation. As inflation rose globally, central banks raised interest rates in the effort to tame price rises. Higher interest rates tempted investors to buy bonds - especially government bonds - and shun gold, which pays no interest.

If inflation gets a fresh kick thanks to a global trade/tariff war, which is a real risk, then we can expect central banks and governments to replay their higher interest rate game. Markets are always trying to peer into the future, trying to understand what might lie ahead.

Hence the 8% drop in the Dollar gold price since the end of October - the anxiety is that with a second (and possibly more aggressive) Trump presidency inflation will get a fresh stimulus, interest rates will start to rise again, and assets which have no yield (such as gold) will be less attractive. The price drop still leaves gold more than 25% higher this year.

Will the rally resume? It's anyone's guess, although some investment bank analysts have, despite Trump's victory and tariff threats, forecast $3,000 or more in 2025. Our view is that gold is money but it is also an asset, one to be held for long-term growth. You don't buy a house and hope to sell it for a quick profit in two weeks' time. The same is true of gold. And gold held with Glint can also be mobilized and used as money in everyday transactions. It is a win-win proposition.

At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.