Will Tax Cuts and Deregulation Weaken the Dollar?
Trump’s proposed tax cuts and deregulation are designed to stimulate economic activity. However, these measures could expand the federal deficit, potentially weakening the U.S. dollar.
When the dollar depreciates, gold tends to benefit as it becomes cheaper for investors using other currencies. Many market participants recall similar trends during Trump’s first term, when tax policies initially sparked optimism but later raised concerns about fiscal sustainability.
Experts at Morgan Stanley suggest the dollar’s performance could be a key driver of gold prices under this administration.
Could Geopolitical Risks Drive Gold Demand?
Trump’s assertive approach to foreign policy has historically heightened global uncertainty. As a result, gold’s role as a safe-haven asset may gain prominence.
Investors seeking stability during unpredictable times often turn to gold, and the potential for diplomatic tensions could increase demand. Analysts at J.P. Morgan forecast gold could average $2,950 per ounce in 2025, with geopolitical risks being a significant contributing factor.
Inflation, Fed Policy, and Powell’s Influence
Trump’s policies could create inflationary pressures, but how these intersect with the Federal Reserve’s monetary stance remains to be seen. Fed Chair Jerome Powell has indicated a commitment to taming inflation through higher interest rates if needed, which could strengthen the dollar and weigh on gold prices.