(Bloomberg) — Gold is seen as the top choice for portfolio hedging in the event that Donald Trump is reelected to the White House, according to the latest Bloomberg Markets Live Pulse survey.
Preference for Gold Over US Dollar
Proponents of gold as a safe haven asset in the event of Trump’s reelection outweighed those choosing the US dollar by a two-to-one margin among the 480 survey respondents. Over 60% of those surveyed believe that the US dollar would weaken if Trump secures a second term.
Historical Context and Potential Impact
Looking back, during Trump’s previous term, the value of the US dollar fell over 10% while gold prices surged more than 50%. Factors such as Trump’s policies of tax cuts, tariffs, and relaxed regulations are viewed as potentially inflationary, which could prompt the Federal Reserve to raise interest rates. A scenario where Republicans gain control of Congress in November could further boost gold prices as it hovers near all-time highs.
Market Analyst Perspectives
Analysts like Gregory Shearer from JPMorgan Chase & Co. suggest that gold is positioned for a rally due to geopolitical tensions, the US deficit, central bank diversification, and inflation hedging. These factors are expected to persist regardless of the election outcome but could be amplified under a potential “Trump 2.0” or a ‘red wave’ scenario.
Macroeconomic Environment
The current macroeconomic environment supports the case for gold, with expectations of interest rate cuts by the Federal Reserve and central banks increasing gold holdings to diversify away from the dollar. A significant number of survey participants anticipate a Trump reelection to weaken the dollar’s status as the world’s reserve currency.
Expert Insights and Counterarguments
Experts like Kathryn Rooney Vera foresee a move away from the dollar with the private sector joining central banks in investing in gold. Conversely, some economists believe that a second Trump term could actually strengthen the dollar due to his trade policies and fiscal decisions.
However, despite varying opinions, there is a consensus among respondents that the dollar may not necessarily benefit from domestic political uncertainty, as highlighted by Kathleen Brooks from XTB.
Survey Results and Market Outlook
The MLIV Pulse survey conducted among Bloomberg readers worldwide reflects divergent opinions on the potential impact of Trump’s economic policies on the dollar. The general sentiment is that market volatility stemming from the election and fiscal implications of a Trump presidency could pose a risk to the dollar’s stability.
The survey was conducted from July 22 to July 26 and included input from a range of financial professionals and investors. Stay tuned for more insights from Bloomberg Markets Live Pulse surveys.
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Additional Insight:
The viewpoint that a Trump reelection could lead to a weaker dollar and increased interest in gold as a safe-haven asset is supported by historical data and current market dynamics. However, the potential impact of Trump’s policies on the economy and currency remains a topic of debate among experts, highlighting the uncertainty surrounding the future financial landscape. Investors and analysts will closely monitor developments in the political and economic spheres to assess the implications for asset prices and market stability.
