With the hedging trend of Trump's tariffs, international gold prices continued to rise today (21st), with a single-day increase of over 2.1%, reaching a historical high of $3,397 per ounce. The market believes that today's increase is closely related to a "strong message" about gold posted by former US President Donald Trump on the social platform Truth Social.
The Golden Rule Of Negotiating And Success: He Who has the gold makes the rules
The Golden Rule Of Negotiating And Success: He Who has the gold makes the rules
This post is mainly to announce the US tariff strategy globally, "those with cards are the winners". However, the external interpretation varies. Many Wall Street gold bulls have begun to quote this post, explaining that Trump will make the United States a country supporting gold assets. However, more netizens are beginning to question whether this is another case of Trump manipulating the market, suggesting "we should check if the entire family and Trump's company have any recent gold transactions".
Surge in Hedging Demand: US Dollar Plummets
The surge in gold price demand may be related to another key factor: the decline of the US dollar. Currently, the US dollar against the euro has reached a new low in a year, and the United States is experiencing a rare simultaneous decline in US stocks, US bonds, and the US dollar. This seems to indicate that the world economy is slipping out of the US dollar system's control. Recent threatening remarks by Trump about Federal Reserve Chairman Jerome Powell's position in the central bank have also added to market uncertainty.
Stock market data shows that in the past 25 years, whenever the global stock market (using the S&P 500 index as an example) experienced significant stress, gold has performed well. For instance, during the 2008 global financial crisis, the S&P 500 index plummeted by 57%, while gold prices rose by 39%. In the early stages of the COVID-19 pandemic in 2020, US stocks dropped by 35%, while gold rose by 32%. In the current trade war context, the S&P 500 index has pulled back nearly 20% from recent highs, while gold prices have risen by over 25%, demonstrating its hedging power.
After gold reaches a new high, Bitcoin often follows with a similar trend, becoming a market-recognized secondary hedging asset.
Short-term Outlook: Focusing on Three Key Variables
The short-term trend of gold and Bitcoin largely depends on the progress of tariff negotiations between the US and China, the political uncertainty of Federal Reserve Chairman Powell's position, and the US dollar's trend. It's important to note that these three factors may influence and pull each other, such as a weakening dollar being favorable for gold prices denominated in dollars.
Among these three factors, the weakening of the US dollar is the most predictable. Trump once mentioned in a White House press conference that a dollar decline is not necessarily bad, as it would increase the cost of dumping for trade manipulation countries and enhance the competitiveness of US exports. As for the other two factors, they depend on future Trump statements and still have significant uncertainty. If this uncertainty is eliminated in the future, a significant pullback is likely.
