Trump's victory and the new rules for gold in 2025

After months of soaring gold prices, there was an abrupt decline shortly after Trump's election victory. On Wednesday, the price of gold fell by more than USD 90, moving away from its record high set at the end of October, causing a tremor among investors worldwide. But why are the markets reacting so unexpectedly to Trump's return to the White House and what does it mean for the future of gold?

With a strong dollar, rising bond yields and Trump's announced expansionary fiscal policy, the precious metal is under considerable downward pressure. The question arises as to whether this trend is really sustainable. While short-term declines can be observed, long-term geopolitical risks, inflation fears and a possible return of the Fed to interest rate cuts could support the gold price again in the future.

In the following, the key factors and possible scenarios that could shape the gold price in 2025 will be considered.

Donald Trump's election victory has sent the markets into turmoil, which is why the price of gold is currently experiencing one of the sharpest declines of 2024. Shortly after the first projections of the US election results, institutional investors began selling their precious metals in order to preserve the profits they had recently generated. The price of a troy ounce of gold fell by more than $90 overnight, moving significantly away from the record high of USD 2,790 and marking a three-month low of USD 2,652. Such a drastic decline shows how strongly gold prices react to speculative factors and macroeconomic developments. There are four key factors that triggered the decline in the immediate aftermath of Trump's election victory.

Trump's election victory led to a noticeable appreciation of the US dollar, which gained particular strength against the euro and the Swiss franc. Analysts attributed this appreciation to the markets' hopes that Trump's “America First” policy could revive the US economy and strengthen the export sector. A strong dollar has far-reaching consequences for gold: Since the precious metal is traded internationally in US dollars, gold becomes more expensive for buyers outside the US, reducing global demand and putting pressure on the price. Historically, there is an inverse correlation between the strength of the dollar and the price of gold – when the dollar rises, the price of gold falls and vice versa. This market reaction underlines the role of the US dollar as a reserve currency and explains why investors react immediately to changes in the currency market.

In addition to the appreciation of the dollar, Trump's election victory led to a rise in yields on US government bonds. In the night after the election, the ten-year US yield rose by 0.18 percentage points to a high of 4.47 percent. Higher bond yields increase the attractiveness of fixed-income securities, which, unlike gold, offer regular interest payments. Since gold does not yield any interest, investments in the precious metal become less attractive when yields rise. This increase in bond yields dampens demand for gold and increases price pressure. In addition, higher yields favor capital inflows into the US, which further strengthens the dollar and puts further pressure on the gold price.

Trump's victory also brought a wave of new market confidence and higher risk appetite, leading to shifts from safe-haven asset classes to riskier but higher-yielding investments such as equities. Historically, Trump's presidency has led to flourishing stock markets and economic growth, encouraging many investors to withdraw capital from gold and invest in growth-oriented assets. In the run-up to the election, some institutional investors had speculated on a Trump victory and reduced their gold positions in anticipation of a “risk-on” scenario. This trend was further reinforced after the election, so that gold was less in demand as a safe investment in the short term.

Another factor behind the high volume of precious metal selling was the expectation that Trump's foreign policy could, at least temporarily, lead to a cooling of geopolitical tensions. Trump's “peace promise” to “end all wars worldwide” was interpreted by market participants as a sign of hope for stabilization. Investors assumed that this approach could lead to an easing of tensions in conflict regions such as the Middle East and Ukraine – factors that had supported demand for gold as a crisis hedge in recent months. This assumption led to a decline in demand for gold, as investors saw a lower probability of an escalation of geopolitical risks for the time being.

The election of Donald Trump promises a return to the economic policies pursued during his first term. Trump's “America First” agenda aims to boost economic growth in the US through tax cuts, deregulation and government investment. But what do these measures mean for the gold price, especially in the context of fiscal and tax policy expectations?

Trump's announcement that he will relieve the burden on companies and individuals by cutting taxes could boost economic growth in the short term, but at the same time it will increase the budget deficit. If the national debt rises, the US debt will also grow, which in the long term could lead to inflation risks. Historical developments show that a high level of debt can potentially lead to inflation, as the government may spend more money and the central bank could be forced to expand the money supply to finance it. Gold has traditionally served as a hedge against inflation because, unlike fiat currencies, the precious metal is better able to maintain its value over the long term. Thus, the expansionary fiscal policy, which relies on tax cuts and higher government spending, could increase the demand for gold as a hedge against inflation risks in the medium to long term.

Another key element of Trump's economic policy is deregulation, which is intended to create new growth opportunities for companies. While a deregulated corporate landscape can invigorate the stock market, it indirectly challenges gold. A flourishing stock market diverts capital from safe investments such as gold into riskier investments that promise higher returns. Trump's goal of boosting the US economy through deregulation could thus lead to an increased outflow of capital from gold. On the other hand, this deregulation can also create short-term uncertainties, which can have a particular impact on heavily regulated industries such as energy and finance. This in turn could keep gold attractive as a hedge against market volatility and unexpected political decisions.

Trump's “America First” policy could also lead to increased protectionism, sparking new trade conflicts with partners such as China and the European Union. Trade conflicts and protectionist measures often have a destabilizing effect on the global economy and increase geopolitical uncertainty. Should Trump reintroduce aggressive tariffs and trade barriers, investors could increasingly turn to gold as a hedge, as the precious metal gains in importance in times of economic uncertainty. However, these effects would depend heavily on how other countries and markets react to potential conflicts. Increased protectionism worldwide could strengthen global demand for gold as a crisis currency.

In addition to fiscal policy, inflation is another key factor associated with Trump's economic policy. The expansive spending policy could cause inflation to rise, especially if interest rates remain low at the same time. Trump was already known for putting pressure on the Federal Reserve during his first term in office to keep interest rates low and thus further stimulate the economy. A combination of low interest rates and rising inflation would push real interest rates – the interest rate adjusted for the rate of inflation – into negative territory, making gold significantly more attractive in such an environment.

If the Federal Reserve gives in to this pressure and keeps interest rates low while inflation picks up, gold could benefit from a negative real interest rate environment. Such a context is positive for the gold price, as investors often seek alternatives to fixed-income investments that lose their value in the event of inflation. This could trigger a significant increase in demand for gold, as the precious metal is historically considered a reliable store of value, especially in times when the purchasing power of money is eroding.

Donald Trump's relationship with the Federal Reserve was already a much-discussed topic during his first term in office. At the time, he frequently put pressure on the central bank to keep interest rates low and loosen the monetary policy reins to support economic growth. His re-election could thus mean a continuation of these policies, which could have a significant impact on the gold price. Four facts show how possible monetary policy decisions by the Fed and market expectations could affect the precious metal.

Trump is known for pursuing an expansionary economic policy supported by low interest rates and loose monetary policy. A low interest rate environment would not only further invigorate the stock market, but could also increase the attractiveness of gold as a hedge against inflation risks. Traditionally, gold prices react positively to low interest rates, as in such an environment the opportunity costs for gold decrease. Since the precious metal does not generate interest, in times of low interest rates investors are more likely to benefit from investing their capital in gold rather than investing in bonds or other fixed-income securities.

If Trump puts pressure on the Fed again, this could lead to a scenario in which interest rates are kept artificially low. This would increase the demand for gold as a store of value and support the gold price in the medium to long term, particularly if the inflation rate were to rise at the same time. Such an environment would tilt the market in favor of gold, as investors seek stable values to protect their purchasing power.

Another consequence of Trump's potential influence on monetary policy is a change in inflation expectations. With the announced tax cuts and government investments, inflation could rise. A high-inflation, low nominal interest rate environment would push the real interest rate – the interest rate adjusted for inflation – sharply lower or even into negative territory. A negative real interest rate has traditionally been supportive for the gold price, as fixed income investments become less attractive relative to gold.

If inflation were to pick up and the Fed continued to maintain an accommodative monetary policy, the real interest rate would continue to decline, which could drive investors to gold. The precious metal would become more attractive as a hedge against the devaluation of purchasing power and as a reliable store of value. In such a scenario, the gold price could rise to new highs as investor demand for alternative, inflation-proof investments grows.

However, another risk lies in market volatility, which reacts strongly to monetary policy signals when the Fed makes announcements. Should the Fed suddenly announce a change of course in anticipation of higher inflation and raise interest rates faster than expected, this could lead to short-term pressure on the gold price. Higher interest rates would strengthen the dollar and positively impact real interest rates, which could dampen demand for gold.

In this context, market participants pay particular attention to the so-called “dot plots”, i.e. the Fed's interest rate expectations. Any unexpected increase in interest rate expectations could cause investors to quickly sell off their gold positions, pushing the price down in the short term. On the other hand, signs of a continuation of loose monetary policy could support the gold price and indicate a sustained upward trend.

Regardless of short-term interest rate fluctuations, inflation remains a key factor for the gold price trend. If Trump's expansive fiscal policy does indeed lead to higher inflation, gold will remain attractive to investors as a long-term inflation hedge. Particularly in times when inflation risks are rising worldwide, both institutional and private investors could increasingly turn to gold as a hedge. However, it remains

Donald Trump's presidency could not only influence the US economy and US monetary policy, but also geopolitical stability. Trump is known for his often unpredictable foreign policy decisions and his “America First” approach. This attitude can both intensify existing conflicts and trigger new tensions – factors that can be decisive for the development of the gold price. Historically, gold has acted as a crisis currency in times of political uncertainty and often experiences higher demand in phases of global tension.

A recurring theme under Trump is the protectionist approach, which has led to numerous trade conflicts. His term in office has been marked by escalating tensions with key trading partners such as China and the European Union. Should these conflicts flare up again, it would give a new boost to gold as an asset class. Trade wars destabilize the global economy and often lead to slumps in growth and currency fluctuations, which push investors into safe asset classes such as gold. Should Trump reintroduce tariffs or trade barriers, it could not only impact global trade but also erode confidence in traditional asset classes. In this context, demand for gold as a store of value would increase.

Trump's often controversial positions on Russia and China create additional geopolitical risk. While he tried to reach out to Russia during his first term, this could at the same time increase tensions with European allies. China's growing influence on the world economy and its importance in geopolitics also create uncertainty. In particular, tensions around Taiwan, which is militarily supported by the US, could escalate under a Trump presidency. In such cases, markets tend to resort to gold as a crisis currency because it is a proven tool for safeguarding investors' assets in turbulent times.

Should there be serious tensions or even a geopolitical conflict between the major powers, the price of gold could skyrocket due to increased demand. These scenarios are difficult to predict. However, their possibility is crucial for investors, as geopolitical uncertainties traditionally boost gold prices.

Another source of uncertainty is potential crises in the Middle East, which could remain a key issue under Trump. The region is known for its geopolitical instability. Trump's strong stance on Iran could therefore lead to new tensions. During his first term in office, Trump took a clear line against Iran, withdrawing from the nuclear deal and enforcing tough sanctions. A similar policy in his second term could reignite tensions in the region and increase the risk of open conflict.

Such a conflict would likely impact global energy prices and could have a knock-on effect on the global economy. Higher oil prices often lead to inflation, making gold more attractive as a hedge against inflation. Furthermore, in times of geopolitical uncertainty, investors increasingly seek out stable assets, which could further increase demand for gold as protection against unpredictable risks.

In addition to short-term crises, gold also remains attractive in a long-term uncertain political environment. Trump's often unpredictable and polarizing policy generates alliances and confrontations that can change quickly. This could lead investors to become more cautious in general and to shift some of their capital into gold. The desire for security and stability in volatile times gives gold a special appeal, as it serves as a proven store of value and retains its value in almost all market conditions.

In summary, a second Trump term can increase geopolitical tensions in various ways and create new uncertainties. If this is the case, gold could benefit from its traditional importance as a crisis hedge and rise in the medium to long term as investors seek to hedge against potential global risks.

The developments under a second Trump presidency allow for several potential scenarios for the gold price, influenced by both US domestic policy and global economic and geopolitical factors. The following scenarios are based on various possible developments in inflation, interest rates and geopolitical tensions and provide a well-founded forecast for the gold price in 2025.

In the bull scenario, the Trump administration continues its expansive fiscal policy, leading to rising inflation. At the same time, the Federal Reserve remains under pressure to keep interest rates low to support economic momentum. This combination of high inflation and low interest rates leads to a persistently negative real interest rate environment, which is extremely favorable for the gold price. A low real interest rate means that investors benefit less from traditional fixed-income investments and therefore invest more in inflation-proof investments such as gold.

In addition, this scenario assumes that geopolitical tensions will increase under Trump. Should there be an escalation in the Middle East or intensified conflicts in the Asia-Pacific region, this would increase the demand for gold as a crisis hedge. Growing protectionism, which undermines confidence in the stability of world trade, could also make the precious metal attractive as a safe haven.

In this scenario, the gold price could exceed the USD 3,500 per ounce mark during the year 2025, driven by a combination of negative real interest rates, rising inflation and high geopolitical uncertainty.

The sideways scenario assumes that Trump's economic policy will remain expansionary, but that inflation can be kept in check. In this case, the Fed will lower interest rates slowly and gradually, keeping real interest rates low but not consistently negative. The demand for gold as protection against inflation and currency devaluation remains, although this would be reflected in a moderate framework.

Geopolitically, the situation in this scenario remains stable, with no major escalating conflicts. Trade conflicts could remain at a low intensity without dramatically intensifying. Demand for gold as a safe-haven investment remains solid in this environment, but the gold price will only move up gradually.

In this scenario, the gold price is expected to be around USD 2,800 to 3,000 per ounce during the year 2025, supported by demand for stable investments in an environment of low real interest rates and moderate inflation risks.

The bear case is based on the assumption that the Fed maintains a tight monetary policy despite Trump's pressure and raises interest rates to keep inflation under control. Higher rates lead to an increase in the real interest rate and could further strengthen the dollar, making gold less attractive as an investment. A strong US dollar increases the costs for gold buyers outside the US and could weaken global demand.

In this scenario, Trump could take a more cautious approach to foreign policy in order to maintain stable trade relations. If there is no significant escalation of geopolitical tensions, a major driver of gold demand would be eliminated. Without increased demand due to inflation fears or geopolitical uncertainty, the gold price would stagnate or even fall.

In a bear market scenario, the gold price could fall to around USD 2,000 to 2,200 per ounce during the year 2025, as higher real interest rates and a strong dollar limit demand for the precious metal.

Donald Trump's election victory has had a significant impact on the gold market in 2024 and could have long-term consequences for the precious metal. Initially, the victory caused volatility: the price of gold fell in the face of a stronger US dollar and rising bond yields. These short-term market factors led to a shift away from gold and towards riskier assets such as equities, as investors bet on Trump's economic program and the stability of the dollar.

Despite these downward movements, the long-term outlook for gold remains characterized by uncertainty and economic challenges. Trump's expansive fiscal policy, which relies on tax cuts and growth-promoting measures, carries the risk of higher government debt and possible inflation. Such an environment could keep real interest rates low over the long term or even push them into negative territory – a scenario that historically increases the attractiveness of gold as a hedge against inflation.

Geopolitical risks are also high on the agenda. Trump's “America First” approach and his unpredictable foreign policy decisions could exacerbate existing conflicts and increase tensions with key trading partners. In addition, the uncertainties in the Middle East and in relations with China remain an ongoing issue. In this environment, gold continues to be seen as a stable store of value and a hedge against global political risks.

Overall, it is clear that gold will remain an indispensable player in 2025 – particularly in an increasingly unpredictable political and economic landscape. Regardless of short-term price fluctuations, gold will continue to be a valuable hedge and stable asset for many investors, and will play an important role especially in times of economic uncertainty and geopolitical risk.