Gold prices are poised for significant growth as President Donald Trump’s economic policies reshape the investment landscape. With inflationary pressures mounting and geopolitical uncertainties escalating, the precious metal has once again become a favored asset for hedging risks and preserving value.
Trump's bold executive actions, including proposed tariffs, immigration reforms, and a withdrawal from international agreements, have created ripples across global financial markets. These policies are fueling concerns about higher inflation, which historically boosts demand for gold as an inflation hedge. Trump's tariff strategy, in particular, has garnered significant attention. Starting February 1st, tariffs of 25% on imports from Canada and Mexico and 10% on Chinese goods are set to take effect. Analysts at Deutsche Bank estimate that these tariffs could drive inflation from 2.9% in December to 3.7% by the end of 2025, marking a 1.2% overall increase in inflation.
As import costs rise, the potential for higher consumer prices grows, which could further enhance gold’s appeal. Goldman Sachs predicts that this inflationary trend will result in increased allocations to gold as investors seek protection against eroding purchasing power. In this context, gold’s traditional role as a safe haven asset has become even more pronounced.
Gold’s potential surge is also linked to Trump’s proposed tax cuts and deregulation measures, which are expected to stimulate economic activity. However, these policies may simultaneously increase national debt and the federal deficit, contributing to a weaker U.S. dollar. A depreciating dollar often boosts gold prices, as the metal becomes more affordable for international buyers.
Geopolitical uncertainty under Trump’s assertive foreign policy approach adds another layer of complexity. Historically, global market tensions have driven investors to seek safe-haven assets like gold. As inflation trends and Federal Reserve actions remain under close scrutiny, the interplay between these factors could provide further upward momentum for gold prices.
Currently, gold futures are trading at $2,777.40, following a $15.30 gain. The metal briefly reached an intraday high of $2,794.80, just $30 shy of its all-time high of $2,826.20, set on October 31, 2024. Many analysts believe that a break above the $2,800 mark could pave the way for a new record high, especially as inflationary and geopolitical risks persist.
For forex traders, these developments present a range of opportunities. A rising gold price could strengthen commodity-linked currencies such as the Australian and Canadian dollars. Meanwhile, inflationary pressures and currency devaluation in the U.S. may prompt shifts in key forex pairs, including EUR/USD and USD/JPY. Investors and traders should closely monitor inflation data, Federal Reserve actions, and Trump’s evolving policies to navigate this dynamic market effectively.
