Trump effect sends gold price soaring

The arrival of President Donald Trump in the White House to take up the reins has helped the gold price surge to its highest levels for two months.

Concerns about the direction of the new US President’s economic policies and a fall in the value of the dollar saw the price of bullion hit £1,001.34 per troy ounce at the close of play on Friday. Today (Monday January 23) it stood at £974.05 at 09:00.

Analysts are expecting market volatility which could spell another golden patch for the precious metal’s value, due to ongoing uncertainty. According to OCBC analyst Barnabas Gan, this could continue for the first 100 days of the new presidency, Reuters reported.

Markets are concerned about President Trump’s protectionist statements and promises of spending increases and tax cuts, which will increase gold’s attraction as a safe haven for investors.

HSBC analyst James Steel said: “The incoming US administration is still a relatively
unknown factor, certainly in comparison to other incoming administrations in recent decades.”

Meanwhile, although the Philadelphia Federal Reserve President Patrick Harker said he expects the cost of borrowing to rise three times this year, depending on the US’s economic performance, this may not be until later in the year. Generally, when interest rates rise, the price of gold falls. 

INTL FCStone analyst Edward Meir said: “Tone set by Trump will likely lead the markets to conclude that Trump's legislative goals may now be harder to achieve as there will not be much bipartisan goodwill or a honeymoon period to work with.

“All this means is that investors could now start to coalesce around the notion that the Fed will stay on hold for longer than expected, which in turn should be constructive for
gold.”