Gold Rises as Investors Weigh Trump’s Impact on Global Economy
Gold prices extended intraday gains to near $2,650 at the North American open on Thursday (2/1) after the New Year holiday. The precious metal gained as its appeal as a safe haven increased, with investors focused on President-elect Donald Trump who will take office on January 20.
Trump’s expected policies, such as higher import tariffs and lower taxes, will be a beneficiary for Gold. Higher import tariffs would lead to a potential global trade war and lower taxes would increase inflationary pressures in the United States (US). Gold tends to outperform amid economic uncertainty as a safe haven bet and higher price pressures, given that investors use the precious metal as a hedge against inflation.
The 10-year US Treasury yield fell to near 4.54% earlier in the year as its rally stalled. In general, lower yields on interest-bearing assets result in lower opportunity costs for non-yielding assets, such as Gold, making them an attractive bet.
Meanwhile, the US Dollar (USD) also strengthened sharply as investors expect high inflation under the Trump administration to force the Federal Reserve (Fed) to adopt a moderate policy easing approach. The US Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, hit a fresh two-year high of 108.90.
On the economic front, lower US Initial Jobless Claims for the week ending December 27 also strengthened the US Dollar. The Labor Department reported that individuals claiming unemployment benefits for the first time were 211 thousand, lower than the estimate of 222 thousand and the previous release of 220 thousand.
Source: FXStreet
