A new 'golden age'?

A President who promises to usher in a new 'golden age' for the US. This statement was not in reference to gold, which slipped more than 1% on news of his unexpected return to the White House, largely due to increased confidence in and demand for Dollars. As the Dollar strengthens, the Dollar-denominated gold price tends to weaken. The Dollar index, which measures the fiat currency against a basket of other fiat currencies, had its biggest one-day gain since June 2016, rising by almost 2%.

The spot gold price rose by 54% during Trump's first term and has risen 50% so far under President Biden. In 18 developed market currencies, gold is at least 30% higher this year. One defining feature of Trump's leadership style is unpredictability, and gold often thrives under uncertain conditions. Trump promised to make the US the world's bitcoin superpower, which led to an 8% jump in bitcoin on the news of his victory. Cryptocurrency supporters, like Elon Musk (whose company Tesla also saw a nearly 15% increase on Trump’s success), are betting on a relaxation of federal regulatory oversight. With Republican control of the Senate and a potential majority in the House of Representatives, there is a possibility of significant changes to federal policies.

But what will these changes entail, and what could they mean for gold?

Challenges to Success

Trump has promised to bring 'success' to the US. What might this mean in practice? "Your future will be brighter than ever before," he said. However, some of the policies he promoted during his campaign—such as tariffs on imports from China and other countries—could lead to increased costs for imported goods, reignite inflation (which tends to push the gold price up), and keep interest rates elevated (which historically has been detrimental for gold, but not recently). The expense of living was a key issue that contributed to the defeat of Kamala Harris/Joe Biden. Moreover, other countries may respond with their own tariffs on US goods, potentially stunting economic growth globally.

Trump also aims to deport millions of undocumented immigrants, which could have unintended consequences. The US workforce currently includes around 5% of unauthorized immigrants, many of whom are engaged in manual labor. If these individuals are deported, projects that rely on manual labor could be significantly impacted.

Gold and Trump

Donald Trump said in the 2016 Presidential race that he favored a return to the gold standard. "Bringing back the gold standard would be very hard to do, but boy, would it be wonderful. We'd have a standard on which to base our money." Trump's tendency to support state sovereignty may embolden legislators in various U.S. states who are working to use their constitutional rights to authorize transactional gold currency. These state-led efforts aim to provide an alternative to the reliance on federal fiat currency, leveraging gold as a stable medium of exchange. With Trump's support for decentralization and state empowerment, these initiatives could gain additional momentum, potentially reshaping how gold is utilized within state economies.

Much depends on how far Trump keep his promises -As the U.S. federal debt surpasses $36 trillion and continues to grow by about $10 billion daily, the urgency to address this unsustainable trajectory becomes increasingly critical. In light of this, discussions have emerged about involving innovative business leaders like Elon Musk in governmental roles focused on cost-cutting measures. Such proposals highlight a desire to leverage private-sector expertise to tackle the mounting debt, which threatens long-term economic stability through potential inflation and diminished confidence in the U.S. Dollar. Despite the gravity of the situation, comprehensive strategies to mitigate the debt remain largely absent from mainstream political narratives. Individuals may find it prudent to reassess their financial plans to safeguard against possible economic downturns. As the nation moves forward, confronting the escalating debt will be essential for ensuring a stable and prosperous future.

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.