Will tax cuts and deregulation lead to a weaker dollar?
President Trump's proposed tax cuts and deregulation are aimed at stimulating economic activity. However, these measures could widen the federal deficit and weaken the US dollar.
When the dollar falls, gold tends to benefit because it becomes cheaper for investors using other currencies. Many market participants recall a similar trend during President Trump's first term, when tax policy initially sparked optimism but later raised concerns about fiscal sustainability.
Morgan Stanley experts suggest that under the current administration, dollar movements could become the main driver of gold prices.
Could geopolitical risks drive gold demand?
President Trump's aggressive approach to foreign policy has historically increased global uncertainty. As a result, gold's role as a safe-haven asset may gain attention.
Investors seeking stability during unpredictable times often turn to gold, and potential diplomatic tensions could boost demand. Analysts at JPMorgan predict that gold prices could average $2,950 an ounce in 2025, with geopolitical risks a major factor.
Inflation, Fed policy, and the impact of Chairman Powell
President Trump's policies could generate inflationary pressures, but it remains to be seen how they will intersect with the Fed's monetary stance. Federal Reserve Chairman Jerome Powell has indicated he is willing to curb inflation by raising interest rates if necessary, which could lead to a stronger dollar weighing on gold prices.
