Last week, gold – once again this year – set a new price record, climbing above $2,482 per ounce. This is mainly due to data coming from the U.S. economy, but also events on the political scene in the USA. We examine how the victory of Donald Trump in the upcoming elections might affect the price of the royal metal.
The fourth ATH (all-time high) of 2024 for the royal metal was reached on Wednesday, July 17. This is due to very good economic data on inflation in the United States, which has been falling for the fourth consecutive month, and the announcement by Fed Chairman Jerome Powell that, given this situation, a rate cut is very likely.
The FedWatch Tool, which predicts the likelihood of a cut, indicates (as of Monday, July 22) that a cut is over 96% certain in September, with rates expected to be reduced by a few points. How many exactly? We don’t know, but the chances of a second cut before the end of the year have also increased.
In the USA, a lot has also happened in terms of political events. First, on Saturday, July 13, there was an attempt to assassinate Donald Trump, who a few days later received the official nomination as the Republican candidate for President of the United States, with J.D. Vance as the vice-presidential candidate.
Meanwhile, on Sunday, July 21, Joe Biden announced he would not seek re-election, succumbing to pressure from Democratic Party leaders, congressmen, and donors following a poor performance during a debate with Donald Trump. Biden has thrown his support behind Vice President Kamala Harris.
How might Trump’s victory affect the price of gold?
The U.S. elections are drawing closer, and this is always a very important event for financial markets, with the eyes of the whole world focused on them. Could the increasing likelihood that Republicans and Trump will regain the presidency affect the gold market? It’s worth looking at a historical analogy here.
When Donald Trump won the election for the first time in 2016, the fourth quarter of that year saw a huge increase in demand for gold. It should be added that U.S. presidential elections always have a rather positive impact on the markets – just before and immediately after the election.
If Donald Trump wins again, his announcements indicate that U.S. foreign policy towards Ukraine is likely to change. This could lead to a shift in power dynamics – the U.S. will not assist Ukraine as it has so far, and greater responsibility for aiding the country will fall on Europe.
This will certainly cause significant upheaval in global affairs, including economic situations, and will lead to greater uncertainties. This, in turn, can cause significant changes in the price of gold. Geopolitical tension escalation is always a fuel that drives the rise in the value of the royal metal.
U.S. economic policy towards China could also become stricter. After all, it was Trump who started the crusade against the growth of the Chinese economy, introducing the first tariffs and economic restrictions on cooperation with China. If the Republican candidate wins again, this policy is likely to continue.
Donald Trump has also urged Jerome Powell, the head of the Federal Reserve, to hold off on any decisions regarding interest rate changes before the election. He has suggested that if Powell complies, he may allow him to complete his term in office.
This is a very strong political hint for Jerome Powell and indicates how Trump intends to conduct his policy. Removing the head of the Fed is not simple, and the decision does not rest solely with the president. But such suggestions that a change might occur could also herald a turbulent approach to personnel policy in the U.S.
Gold at $2,600 by next year?
These kinds of situations will increase market risk, which is always beneficial for gold prices. Any uncertainty works in favor of the royal metal, and JP Morgan predicts that the average price of gold in the fourth quarter of 2024 should reach $2,500 per ounce.
This means that gold may soon break its all-time high again, setting new records. Moreover, JP Morgan assumes that central banks will continue to buy gold and indicates that the price of gold will keep rising next year. By the fourth quarter of 2025, it may already be hovering around the $2,600 per ounce mark.
Michał Tekliński, gold market expert at Goldsaver.pl, Goldenmark Group
