Goldman Sachs strategists say that the November US election may cause inflation and that gold is a way to hedge against this risk.

Goldman Sachs strategists, led by Daan Struyven, believe that if the Republicans win both the presidency and Congress, it will pose the greatest risk to US inflation and bond returns.

Because this outcome would mean higher import tariffs for the US economy, slower immigration, stricter sanctions on Iranian oil, lower taxes, and the White House and Congress may attempt to exert more influence over the Fed's policies.

Last week, it was reported that former US President and Republican presidential candidate Donald Trump said that if he is re-elected, he will reduce the corporate tax rate from 21% in his first term to 20%, replacing it with tariffs.

There are also reports that Trump's allies have developed plans to weaken the Fed's independence, although his campaign team has not confirmed such plans.

Goldman Sachs strategists pointed out that there are four reasons why gold can be a safe haven:

1. (Irrelevant to the election) The steady demand of emerging market central banks and Asian households may push gold prices up to $2,700 per ounce by the end of the year.

2. If the US increases its sanctions on Iranian oil, the gold price may rise by 15% from the current level.

3. If there are concerns about the US government's ability to repay its debt, the US credit default swap (CDS) will rise significantly, which may bring another 15% growth to gold.

4. Fed Chair Powell's term expires in May 2026, and Trump's new government may more directly voice its opinions on the Fed's position, and the market will be concerned about the Fed's independence, which may support gold prices.

Finally, Goldman Sachs strategists added that buying gold options is cheap and using gold options for hedging can provide significant returns. They also added that the tightening monetary policies of central banks do put pressure on gold's performance.

Editor / jayden