Source: Jin10 Data
Author: Yang Large Cap
Historical data has shown that if Trump returns to the White House, global investors may turn to gold...
Heraeus precious metal analysts stated that the prospect of Trump winning in November may drive global investors to turn to gold, and both gold and silver prices will benefit from tariffs and trade disputes.
In its latest precious metals report, Heraeus analysts wrote, "The presidential election on November 5 will lead the United States down two very different paths, depending on the outcome. Former president and current Republican presidential candidate Trump may introduce some economic policies that could cause market volatility, geopolitical risks and inflation to rise."
Trump currently has a support rate of approximately 46.9% in the polls, higher than Biden's 44.1%.
Heraeus pointed out that restarting the trade war could harm the US and global economy. A Peterson Institute document found that these proposed tariff policies could lead to a 1.8 percentage point decline in US GDP and a sharp increase in inflation. This assessment does not yet take into account the "retaliatory tariffs" that other countries are almost certain to implement.
Analysts pointed out that the 2018-2020 trade war coincided with the rise in gold prices. They said, "During this period, due to protracted negotiations, coupled with tariffs and geopolitical escalation, investors sought gold as a safe-haven asset. The appreciation of gold was closely related to the increase in tariffs. At that time, the global ETF's gold holdings increased from 71 million ounces at the end of 2017 to 86 million ounces at the end of 2019, and the holdings of US physical gold ETFs increased from 37 million ounces to 44 million ounces.
Heraeus is concerned that Trump may also undermine the independence of the Federal Reserve, as during his first term as president, he publicly criticized Fed Chairman Powell for raising interest rates.
"The unofficial suggestions put forward by Trump's campaign team include undermining the independence of the Federal Reserve and may terminate Powell's tenure ahead of schedule. Trump may replace him with a dovish candidate after Powell's term expires in 2026. In addition, Trump may appoint several directors who support loose monetary policies to the FOMC."
"A more dovish FOMC will accelerate interest rate cuts, relax controls on inflation, weaken the US dollar, and increase investor demand for gold. In addition, any moves by Trump against the Federal Reserve may shake confidence in US monetary policy, further boosting gold prices."
As for the precious metal environment in Asia, analysts pointed out that India's demand for gold is still strong. They pointed out that India's gold imports in May remained strong, reaching about 44.5 tons, indicating that gold purchases were higher than the average level. Although the import volume in May was slightly lower than the 58.5 tons last year, which was a particularly high year for gold consumption in India, the high gold import volume around the middle of the year in India usually translates into strong festival jewelry production in the third quarter.
Heraeus also pointed out that the Reserve Bank of India has already absorbed 24.1 tons of gold by 2024, exceeding the total amount of last year. They said that the Reserve Bank of India is the third largest central bank to buy gold this year, second only to Turkey and China.
Regarding silver, Heraeus believes that the expansion of the US solar manufacturing industry, coupled with increased trade barriers, may help boost domestic silver demand in the United States.
They also pointed out that the demand for silver is not only from solar energy. They stated, "In the United States, expanding the infrastructure of electric vehicle chargers is also a key area for government subsidies. Since January 2021, the number of public electric vehicle chargers in the United States has grown by 55% to about 175,000. Silver is an integral part of connectors and various components."
Editor/Jeffy