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Pro-business policies and America-first rhetoric championed by President-elect Donald Trump have weighed on gold prices as market participants pivot towards U.S. equities and the dollar heading into the new year. While the gold market has struggled for direction in the short term, analysts at CIBC suggest that investors should not overlook the metal’s potential longer-term gains. The outlook for 2025 paints a very different picture, as anticipated policy changes and economic shifts under the Trump administration could create favorable conditions for gold to shine brighter in the coming years.
According to CIBC, a potential gold rally is far from off the table. Their bullish stance stems from expectations that Trump’s economic policies will likely stimulate inflationary pressures in the medium term. Historically, gold has performed well during inflationary periods as it serves as a hedge against the erosion of purchasing power. A potential surge in government spending, coupled with aggressive tax cuts and infrastructure initiatives, could widen the budget deficit and boost inflation, ultimately supporting gold prices. Additionally, while the initial reaction to Trump’s policies has sparked optimism in equity markets, rising valuations could eventually lead to a rotation back into safe-haven assets, including gold, as investors seek to diversify their portfolios.
Another critical factor that could bode well for gold by 2025 is geopolitical uncertainty. Trump’s “America-first” policies, including renegotiating trade deals and adopting a more protectionist stance, could create trade tensions and market volatility. Historical trends suggest that gold tends to benefit from such uncertainty, as it is viewed as a store of value during times of heightened geopolitical risk. Furthermore, the performance of the U.S. dollar will be central to gold’s trajectory. While the greenback has shown strength in Trump’s early tenure, a weaker dollar scenario driven by growing fiscal imbalances or easing Federal Reserve policies could provide significant upside for gold prices.
The Canadian bank also highlighted the broader macroeconomic environment, such as potential global growth slowdowns and shifts in central bank strategies, as a factor that could further bolster gold’s appeal in the long term. Although gold has faced headwinds in recent months, partly due to higher interest rates eroding its competitiveness against yield-bearing assets, the metal’s role as a strategic hedge cannot be overlooked. Market dynamics are complex, and while equities may continue to thrive in the short term under pro-business policies, the case for a resurgence in gold prices remains compelling, particularly as we approach 2025. Investors may do well to keep a close eye on evolving economic indicators and policy impacts to capitalize on gold’s potential recovery.
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