Gold Is The Best Safe Haven Under ‘Trump 2.0

(July 30, 2024 - Ernest Hoffman, Bloomberg survey)

(Kitco News) – Gold is the best hedge asset for investors if Republican candidate Donald Trump wins the presidency in November, as his policies are likely to weaken the dollar and further boost the price of the yellow metal, according to a new Bloomberg survey.

“Proponents of the precious metal as a haven play in case of Trump’s reelection outnumbered those picking the US dollar two-to-one among the 480 respondents,” the news agency reported in the latest Bloomberg Markets Live Pulse. “Just over 60% of those surveyed see the greenback ultimately weakening in the event the Republican candidate secures another presidential term.”

Bloomberg noted that history supports their bullish stance on the precious metal, as the dollar slid more than 10% during Trump’s term in office, while the spot price of gold rallied over 50%.

“Trump’s platform of tax cuts, tariffs and weaker regulation are viewed as inflationary on Wall Street and could even force the Federal Reserve to increase interest rates again,” they wrote. “A red wave in November that ushers in Republican control of Congress, granting Trump greater leeway in enacting sweeping economic policies, could further ignite the precious metal as prices hover near all-time highs.”

“Gold sits in a prime position to rally,” said JPMorgan Chase analyst Gregory Shearer, who noted that geopolitical tensions, a growing deficit, central bank reserve diversification, and hedging against high inflation have already driven bullion prices to new record highs. “These factors likely endure regardless of the election outcome but could be further magnified under a Trump 2.0 or ‘red wave’ scenario,” he added.

While gold’s most dramatic gains under Trump came in 2020 as investors fled to safety during the once-in-a-century Covid-19 pandemic, the report noted that this “wasn’t even the biggest surge under a president we’ve seen in the past fifty years” as the price runups under both George W. Bush and Jimmy Carter were even larger.

“This time around, the macro backdrop is again favorable for bullion,” the report said. “The Fed is expected to start to cut interest rates in September. Central banks have been scooping up gold aggressively since 2022 in an effort to diversify away from the dollar.”

According to the survey, two-thirds of respondents believe a second Trump presidency will “undermine the dollar’s status as the world’s reserve currency.”

“Client portfolios are adding gold holdings. There’s a lot of expectations of a weaker dollar,” said Kathryn Rooney Vera, chief market strategist at StoneX Group. “Technical, structural and fundamental factors are all supportive of gold.”

While gold was the clear winner as a safe haven, the survey’s respondents were divided on the impact of Trump 2.0 on the dollar, with some seeing a weaker dollar no matter who wins the election. “Sustained high deficits and lower interest rates will push further de-dollarization and begin a sovereign debt crisis,” wrote one respondent. “It’ll be the same if Kamala Harris wins.”

The U.S. dollar and Treasuries are traditionally seen as global safe haven assets during periods of geopolitical turmoil, but the survey results “indicate that the greenback may not be the beneficiary of homegrown political volatility.”

“When the US is creating its own risk premium due to a potentially disorderly election, the fiscal implications of a Trump presidency, that makes the dollar in 2025 a risk,” XTB research director Kathleen Brooks said.

The MLIV Pulse survey was conducted from July 22-26 through the Bloomberg News terminal and online readership, and included portfolio managers, economists, and retail investors.