Eric Sepanek
SBC Founder
Eric Sepanek is the founder of Scottsdale Bullion & Coin, established in 2011. With extensive experience in the precious metals industry, he is dedicated to educating Americans on the wealth preservation power of gold and silver.
Gold remains below record highs posted before the US presidential race. The yellow metal’s 2024 rally had been muted following this pivotal political contest, but analysts argue the current “Trump dump” isn’t only short-lived but entirely predictable. Leading fund managers put forth a gold-positive thesis that the fundamentals driving the precious metal are strong enough to push past any potential headwinds caused by the new administration.
The Post-Election Effect
Following a relentless 35% upsurge, gold prices cooled off by around 8% in the post-election environment. This relatively minor drop seemed more dramatic given prices had risen steadily since the beginning of the year, charting more than 40 record highs on the way. Not only is this slump minor in the grand scheme of gold price action, but it’s indicative of normal behavior.
This trend shows a strong bias toward Republican candidates, as red wins since 1976 have coincided with an average 4.54% 60-day decline in prices. After Trump’s upset victory in 2016, the yellow metal dropped by 11.6%. Yet, this first “Trump dump” was followed up with a decisive 54% gain throughout the rest of the term, only bested by gold’s performance under George W. Bush’s two terms where it rose by more than 220%.
Gold’s Swift Recovery
The yellow metal is already demonstrating its strength with a decisive recovery from the post-election retreat. Prices reached a relative low of $2,562.10/oz on November 15 before immediately shooting back up to $2,716.04 only a week later, recovering most initial losses. Gold prices pierced the $2,700 mark another time in mid-December, signaling strong momentum to the upside.
The end of the year saw a trading range around $2,600 with only a short-lived dip below, indicating consolidation in preparation for the potential next leg up. Besides, December tends to be one of the slowest months of the trading year as investors tune out of the market due to holiday festivities.
How will gold respond to Trump 2.0?
Thus far, gold’s post-election performance has been laser-focused on the race’s outcome. However, in 2025 and beyond, the yellow metal’s performance hinges more on concrete policies pursued by Trump and Republicans which enjoy a majority in both houses.
Advocates and opponents broadly agree Trump 2.0 will have a mixed effect on gold, with some indicating a trade-off of short-term pain and long-term gain. Generally, the administration’s disruptive economic policies are expected to increase inflationary pressures—a bullish sign for gold—even if putting the American economy at an advantage.
The Fundamentals Favor Gold
The uncertainty surrounding Trump’s economic impact might be stealing the spotlight, but there are many more factors influencing gold prices. The variables fueling the rally fall outside the influence of the President-elect, no matter how broadly he wields his executive power.
Inflation
As mentioned before, the incoming administration’s disruptive agenda is expected to keep inflation around, which is positive for gold prices. As Cameron Judd, gold strategy portfolio manager for Victor Smorgon Group, explains, “I think (Trump’s election) is more inflationary, which is one of the key principles of our gold investment strategy.”
Interest Rate Cycle
The Federal Reserve flipped the switch on years-long rate hikes with a decisive slash. With the economy on an easing trajectory, the dollar is on track to lose appeal as the opportunity cost of owning physical assets decreases. “Our view is that the interest rate cycle is going to be the key driver,” highlights Stephen Gorenstein, portfolio manager for Ari Fund.
National Debt
The exploding national debt, which is projected to reach $43 trillion under Trump, is causing a global transition from the dollar to gold. “A lot of other central banks, particularly those that own a lot of this US debt, like the Chinese and the rest of the BRIC countries will continue to be buying gold,” explains Hayden Bairstow, executive director and head of equity research at Argonaut.
“The reasons to own physical gold right now are more serious than ever. The problems with our debt and the dollar aren’t going away.”– Todd Graf, Precious Metals Advisor at Scottsdale Bullion & Coin