Will Tax Cuts and Deregulation Weaken the Dollar?
Trump’s proposed tax cuts and deregulation are intended to stimulate economic activity. However, these measures could increase the federal deficit, potentially weakening the U.S. dollar.
When the dollar depreciates, gold usually benefits because 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 that the dollar’s performance under this administration could be a key driver of gold prices.
Can geopolitical risks boost gold demand?
Trump’s assertive approach to foreign policy has historically increased global uncertainty. As a result, gold’s role as a safe haven may become more important.
Investors seeking stability in unpredictable times often turn to gold, and the potential for diplomatic tensions could increase demand. Analysts at JP Morgan predict that gold could average $2,950 per ounce by 2025, with geopolitical risks being a major factor.
Inflation, Fed Policy, and Powell’s Influence
Trump’s policies could create inflationary pressures, but how they relate to the Federal Reserve’s monetary policy remains to be seen. Fed Chairman Jerome Powell has signaled he wants to curb inflation by charging higher interest rates if necessary, which could strengthen the dollar and weigh on gold prices.