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Gold has become the best-performing “Trump Trade” in recent weeks, surpassing other major asset classes since Donald Trump’s inauguration.
Bullion is rising prices every week this year as Trump began to impose drastic tariffs and began to score a new record of $2,942.70 per troy ounce this week. Since the inauguration ceremony on January 20th, more than 7% has increased sharply.
In contrast, Wall Street’s S&P 500 share index is up below 2%, but other popular Trump deals such as stronger dollar bets, higher financial yields and Bitcoin backfire Ta.
“When a trade deal is made, Gold will take off,” HSBC precious metals analyst James Steele pointed to previous examples amid the Covid-19 pandemic and the global financial crisis.
“The more tariffs progress, the more this will disrupt global trade and be better for money,” he added.
Bullion rallies have been overcharged by expanding New York stockpiles, increasing 116% since the election, with traders and banks rushing to move gold from London, the largest physical trading hub, to the US I’m here. It created a queue that lasted several weeks to withdraw money from the Bank of England safe.
Trump’s latest tariff Salvo includes plans to introduce “mutual” tariffs on US trading partners, including both allies and enemies. He also imposes an additional 10% tariff on goods from China.
Analysts say the world trade war will curb economic growth and fuel inflation. This is usually a factor that will benefit bullion.
“Gold is Trump’s tariff trade,” said Nikki Shields, an analyst at MKS Pamp, a gold refiner. “There is a positive correlation between tariff headlines and gold prices rising,” she added.
Gold has been in a long rally, but other Trump deals have lost money. The dollar has slipped 2.4% against baskets of other currencies this year, falling sharply since taking office. The US Treasury yields rose slightly above 4.8% last month, back to 4.48% as debt prices were recovered.
Traders and investors say a more progressive approach to tariffs than they previously feared has lifted currencies in countries and regions where large exports such as the euro are present. Meanwhile, a shift in market focus on risks to growth from the trade war has led investors to buy government bonds.
“Gold can serve as a geopolitical hedge, inflation hedge, and dollar hedge,” said Trevor Greetham, multi-assets head of assets management at Royal London.
“The first two have made gold a strong investment last year, with central banks and retail purchases increasing prices.”
The recent decline in greenbacks has been added to the pressure of the amount upwards at the price of the amount, making it cheaper to buy in other currencies.
As gold hit a series of record highs, some banks had to upgrade their price forecasts they had already set for December. Last week, both UBS and Citigroup upgraded their target price to $3,000 per troy ounce.
Strong purchases from central banks are expected to be a key driver of gold demand this year as central banks seek to diversify away from the dollar.
The central bank has purchased more than 1,000 tonnes of gold for the third consecutive year last year, according to data from the industry group World Gold Council.
Mark Bristow, chief executive of mining company Barrick Gold, said the “worldwide turmoil” served fuel investors as shelter for investors’ fuel needs.
“The markets make it clear that there is only one reserve currency in this world. That’s something politicians can’t print. It’s gold,” he said.
