If you think the world has gone crazy, you’d be right. However, there is a silver lining to every cloud. In this case it’s a gold lining.
When Trump won the race to the White House the pundits were very bullish on the stock markets. Trump’s victory was supposed to see a surge in equity prices, instead now we are on the verge of a Dot.com bubble 2.0.
Initially Trump’s victory set high expectations of surging of equities prices and for a higher dollar. Under those circumstances gold faltered. On the heels of Trump’s victory gold slumped to a three year low – but now it has been hitting all time highs again.
You see once Trump took office the situation changed dramatically. The tariffs and threats of more tariffs have upset the markets and weakened the dollar also. As a result gold has risen above $3,000 an ounce. Yet, this could look cheap by the end of the year the way things are going.
Add to the tariffs, Trump’s warring against Iran. The bombing against Yemen that started recently, as well as additional bombing by Israel of Gaza and surrounding countries all bring instability and threaten a rise in the cost of oil.
Higher oil prices push countries into dragflation (recession and inflation at the same time).
All will serve to push gold prices up.
Following the seizure of Russian assets it is well known that non-Western central banks the world over have increased their gold buying programmes. Meanwhile China continues to de-dollarise their dollar reserve holdings and accumulate gold.
Meanwhile the Dot.com 2.0 bubble is getting ready to burst or is rather currently bursting. It has been the high-tech stock that has been keeping the stock market up in the past period. China’s release of DeepSeek showed the negative impact on US stock prices. Now the tech sector is in bear territory.
With a bear market, gold can only seem positive at this junction.
Will interest rates fall? Trump could push Jerome Powell to lower rates as the economy tanks, unfortunately this could increase inflation by weakening the dollar. The Fed is caught on the horns of a dilemma.
Lower rates is good for gold and the general indebted economy. Higher interest rates are typically not good for gold but, if they were in conjunction with higher inflation, than that is also positive for gold.
The markets though are focused on geopolitical tensions, concerns about European economies, soaring global debt levels and political uncertainty.
In the uncertainty and chaos currently driving the world comes opportunity. That opportunity lies in gold - the ultimate safe asset. So to conclude it’s all looking very bright for the shiny metal.
