Donald Trump’s election boosted the stock market and bitcoin. Gold may take longer to recover.
In the two days following the Republican candidate’s victory, the precious metal’s performance was the worst in 13 US presidential election cycles, according to Deutsche Bank. Gold prices have fallen nearly 7% since Election Day.
“People really get into gold when nothing else is working,” said Rob Haworth, senior director of investment strategy at US Bank. “Stocks are doing well; you’re even seeing solid returns for low-quality corporate credits. Then you are less likely to seek alternative sources of growth for the portfolio.”
Gold’s fall represents a striking turnaround for a commodity that had risen more than 30% in the year leading up to the US election, hitting successive records as geopolitical and economic risks lured investors.
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While long-term uncertainty still remains, with Trump known for his unpredictable stances, much of gold’s safe-haven appeal faded after the most optimistic scenario for the metal — a contested election — failed to materialize.
A rising dollar in the days following Trump’s re-election is also unfavorable for gold, as it is priced in US currency. At the same time, the US economy appears to be in good shape, with inflation decreasing.
“Gold would be a contrarian bet,” said Matt Miskin, co-head of investment strategy at John Hancock Investment Management. “The current feeling is that there is very little risk, whether in the fundamentals of the economy or geopolitically. In environments like this, it’s not easy to go against the moment.”
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Some investors may not agree with the president-elect’s platform, but just knowing what to expect from a second Trump term has helped remove some of the recent uncertainty that had driven the yellow metal to all-time highs. Confirming a Republican victory also means more room to implement the policies he put forward during the campaign. Trump’s agenda, which includes tax cuts, financial deregulation and tariffs, has attracted hedge funds to sectors that stand to benefit, including big banks and manufacturing.
“We have more attractive places to allocate capital” than gold, said Jay Hatfield, CEO of Infrastructure Capital Advisors, citing opportunities in financials and other riskier assets. “Who wants to miss the 10% rally in Goldman Sachs?”
Cryptocurrencies have also soared since Election Day on expectations that Trump’s policies will give a boost to digital assets. Total assets of the iShares Bitcoin Trust, BlackRock’s cash bitcoin ETF, surpassed $40 billion for the first time last week. This increase coincided with a strong outflow from SPDR Gold Shares, the world’s largest physical gold ETF.
“With a Trump victory, we will likely see less regulation in cryptocurrencies. This should attract at least some capital that speculatively could move from gold to crypto assets now,” said Kristina Hooper, chief global market strategist at Invesco Advisers.
Still, gold may have room to recover in the long term. Trump’s tough promises on taxes and tariffs will likely result in higher deficits and inflation, which could trigger a return to buying gold as an inflation hedge.
If a second Trump term destabilizes global trade and geopolitics, it could also lead central banks such as those in China and Russia to continue buying gold to diversify away from the dollar reserve system.
“Many reserve managers from ‘friendly’ and ‘neutral’ countries will be a little more concerned about a more erratic foreign policy and its implications for the security of their reserves,” said Rajeev De Mello, global macro portfolio manager at Gama Asset Management SA.
Gold’s current momentum would be “a dip buying opportunity more than anything else,” he added. “After the sharp decline since the US elections, the metal has entered a more affordable range.”
By Yvonne Yue Li and Sybilla Gross
