Goldman Sachs is Still Bullish on Gold
Gold is back on the rise again from gold price forecast. After a breathless, record-breaking run in 2024, Goldman Sachs is now bullish on gold for the next 13 months. The bank’s latest forecast calls for gold to rise 15% to $3000/oz by the end of next year. 11 https://www.barrons.com/articles/gold-goldman-djt-stock-trump-1ccc93af
The commodities research division at the investment firm cited interest rate cuts and central bank demand as key drivers for gold price forecast in 2025. Indeed, the Fed is widely expected to cut rates again in December and central banks look poised to continue to stock up on gold to diversify their reserves.
According to ING, central banks added 1,037 tonnes of gold in 2023 to notch the second-highest annual purchase in history following a record high of 1,082 tonnes in 2022. “Looking ahead, we expect central bank demand to remain strong amid the current economic climate and geopolitical tensions,” the financial group stated. 2https://think.ing.com/articles/gold-monthly-golds-rally-is-just-getting-started/
The Second Coming of Donald Trump
While many Americans seem to be basking in the optimism of Trump’s pro-business, pro-worker, and pro-family policies — his second presidency also represents dramatic change and a great deal of uncertainty.
From launching the new Department of Government Efficiency (DOGE), to abolishing the old Department of Education — from deporting millions of illegal migrants, to slashing $2 trillion from the federal budget — Trump and his team are taking a wrecking ball to D.C. There is an old saying on Wall Street that “bad certainty is better than uncertainty” and Donald Trump has a penchant for the unpredictable and the mercurial.
He also has an impact on gold price forecast. When Trump was first inaugurated on January 20, 2017, the price of gold was $1209.02/oz. When he left office four years later, gold had surged to $1870.02/oz an increase of over 54%.
According to fintech company Skilling, 2017 saw modest price gains for gold due to geopolitical risk and economic uncertainty. In 2018, gold slumped on a stronger U.S. dollar. In 2019, trade tensions sent gold up sharply. In 2020, gold skyrocketed due to the disruption, volatility, and unprecedented monetary stimulus and financial relief provided in response to the Covid-19 pandemic. 3https://skilling.com/row/en/blog/commodities-trading/gold-price-chart-over-the-past-10-years/
According to The South China Morning Post:
“Demand for gold will continue to rise following Donald Trump’s victory in Tuesday’s US presidential election, which will increase trade tensions and uncertainties for the US dollar and US dollar-denominated assets, analysts said, predicting that gold prices will hit fresh highs despite a recent fall. According to GF Securities (Chinese brokerage firm), so-called ‘Trump deals’ since the start of October took many expectations into account, leading to a strong US dollar, rising gold prices, falling oil prices, falling copper prices, and volatile US stocks, and the market was likely to trade in the opposite direction in the short term.” 4https://www.scmp.com/economy/china-economy/article/3285513/will-gold-gain-lustre-wake-trumps-election-win
A Geopolitical Minefield and a Biden Parting Gift
As he prepares to retake the White House, Donald Trump is inheriting a far more dangerous world than he did in his first term. War is raging between Russian and Ukraine, Israel and Hamas, and tensions are increasing between the United States and China, Iran, and North Korea. Most of these countries own nuclear weapons and for the first time in generations, the world is confronting the very real possibility that they could use them.
According to the Atlantic Council, for Trump to succeed in bringing peace and stability to Europe and the Middle East, it will require a multi-pronged strategy and an awareness of the historical significance of the challenge.
“To prevail, it will take a grand strategy’s combination of military doctrine, force structure, alliances, economic relations, diplomatic behavior, technological leadership, societal strengths, and the mobilization of sufficient methods and resources… The last time the United States confronted such an opposing group of autocrats was in the opening years of the Cold War, when the country and its allies faced off against Nikita Khrushchev’s Soviet Union, its Warsaw Pact allies, and Mao Zedong’s Communist China.” 5https://www.atlanticcouncil.org/content-series/inflection-points/trump-is-inheriting-a-more-dangerous-world/
On Monday, November 18, 2024 — President Biden authorized Ukraine to use powerful American Army Tactical Missile Systems, or ATACMS inside Russia. These are long-range, ballistic missiles that according to Lockheed Martin use global positioning technology, can carry a 500-lb warhead and have a maximum range of 300 kilometers (186 miles). 6https://www.lockheedmartin.com/en-us/products/army-tactical-missile-system.html
This move comes as up to 100,000 North Korean troops are believed to have been deployed by Pyongyang in support of Russia. The Kremlin has vowed to “respond” to the authorization of the new American weapons in what it deemed to be a reckless decision by Joe Biden.
The Trump Tariffs
It’s no secret that Donald Trump is a global disrupter, and he has not minced words about his desire to increase import taxes to as high as 60% on goods from China and 20% on all other imports into the United States.
But Trump’s “America First” agenda and his efforts to bring about an American “manufacturing renaissance,” could come with a cost to U.S. consumers according to the Peterson Institute for International Economics:
“We find that imposing a 20 percent across-the-board tariff combined with a 60 percent tariff on China would cost a typical US household in the middle of the income distribution more than $2,600 a year. That’s up from the $1,700 loss in after-tax income that would result from his earlier plan.”7https://www.piie.com/research/piie-charts/2024/trumps-bigger-tariff-proposals-would-cost-typical-american-household-over
There is also a potential inflationary impact to tariff hikes. Deutsche Bank estimates that inflation could rise anywhere from 0.75% to 2.5%. 8https://flow.db.com/trade-finance/trump-trade-back-to-the-future#2 And major retailers like Walmart and Lowe’s have suggested that they may have to raise prices if the full force of Trump’s tariffs take effect. In addition, the National Retail Federation has suggested that the new tariffs will drive inflation, increase prices, and cause job losses. 9https://www.cnbc.com/2024/11/19/walmart-says-new-trump-tariffs-could-raise-prices.html
The Ticking Debt Bomb
Another parting gift from Joe Biden to Donald Trump is a dramatic increase in the national debt. The Congressional Budget off now expects US debt to be $7.2 trillion higher than when Trump left office in 2021 due to a series of pricey executive actions and hefty spending bills passed by the current administration. 10https://www.heritage.org/debt/commentary/the-lefts-7-trillion-lie-biden-far-outpaces-trump-racking-the-national-debt
According to a working paper by the American Enterprise Institute,
“When federal budget deficits in the U.S. routinely exceed 5 percent of GDP, even in good economic times, and the debt outstanding of the federal government approaches 100 percent of GDP, when intergovernmental accounts are netted out, and over 120 percent on a gross basis, many policymakers and bond market participants want to know what the sustainable limit is. That is, they know that the U.S. will soon blow past the historical high ratio of net debt to GDP reached at the end of World War II, which served to liberate the world and save civilization.” 11file:///C:/Users/Trish/Desktop/Warshawsky-Bokhua-Current-Estimates-of-Sustainable-Debt-WP.pdf
US national debt has just eclipsed $36 trillion. And while political change, global wars, and Trump’s impact on world trade are all likely to fuel gold’s continued rise, America’s rising debt is like rocket fuel for gold prices.
As federal debt soars, analysts at Bank of America are questioning the appeal of treasuries which have traditionally provided portfolio protection in times of economic uncertainty. They now suggest that gold is the better safe haven asset.
“With lingering concerns over U.S. funding needs and their impact on the U.S. Treasury market, the yellow metal may become the ultimate perceived safe haven asset … Ultimately, something has to give: If markets become reluctant to absorb all the debt and volatility increases, gold may be the last perceived safe haven asset standing.” 12https://finance.yahoo.com/news/gold-safer-u-treasury-bonds-184331233.html
The bottom line is rising debt-to-GDP ratios have almost always led to higher gold prices due to concerns about currency devaluation, the high cost of servicing the debt burden, and increased central bank demand for the yellow metal — no matter who is president.
Make no mistake — Trump’s desire to drain-the-swamp, ever-rising geopolitical tensions, and our increasingly unsustainable national debt could trigger the start of a new super cycle for gold.
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1 https://www.barrons.com/articles/gold-goldman-djt-stock-trump-1ccc93af
2 https://think.ing.com/articles/gold-monthly-golds-rally-is-just-getting-started
3 https://skilling.com/row/en/blog/commodities-trading/gold-price-chart-over-the-past-10-years
6 https://www.lockheedmartin.com/en-us/products/army-tactical-missile-system.html
8 https://flow.db.com/trade-finance/trump-trade-back-to-the-future#2
9 https://www.cnbc.com/2024/11/19/walmart-says-new-trump-tariffs-could-raise-prices.html
12 https://finance.yahoo.com/news/gold-safer-u-treasury-bonds-184331233.html
