Trump shows gold the way to $4,000

In one of its latest issues, the Financial Times called gold “Trump’s top asset.” Traders and investors expected the arrival of the new president to be accompanied by market behavior for every taste – a strong dollar, a boom in crypto or a jump in the yield of US government bonds – but the reality turned out to be different. We see records in only one place, and that is with the yellow metal.

The price of gold has passed the psychological threshold of $2,900 per troy ounce and is currently preparing to storm the coveted $3,000. Just a few years ago, we were talking about how the $2,000 peak had just been conquered and that a tailwind was coming to the next achievements. Over 40% growth in 12 months would have sounded like fiction just five years ago, but today it is a reality and all forecasts turn out to be conservative.

Why is all this happening and what does President Trump have to do with it, who in just one month in office contributed to over 7% growth in the price of gold?

1. The world is drowning in debt– the latest data from the end of 2024 shows a total global debt of $323 trillion – levels unseen in peacetime, comparable only to the period after World War II. All major economies are accumulating debt, with even the US accepting budgets with a deficit of over 7% and a projected worsening trend.
2. Debt means inflation– as history shows, the only politically feasible way to reduce debt of this magnitude is monetization – printing money and creating monetary inflation to devalue the debt. As nominal GDP increases, the relative value of the debt falls and the price of gold rises.
3. Trump imposes tariffs– the new-old president has proven to be even more aggressive in imposing tariffs than expected. This time not just on China, but on all countries that “create” a US trade deficit. Canada, Mexico, the European Union, countries in Latin America, and probably soon some in Asia are falling under the trade restrictions. Tariffs shrink trade, and when trade shrinks, gold goes up.
4. Trump is reshaping the geopolitical order– leaving Europe to fend for itself while shifting the focus of American policy to East Asia. Countries are jostling for a place in the new order, fear is rising, and a suitable strategic hedge is sought. For 5,000 years, the main hedging asset has been gold – and its price is rising accordingly.
5. Trump doesn’t want a too expensive dollar– global central banks are looking for diversification from dollar assets, while the president wants strong US exports and a stock market. The result is that central banks have bought over 1,000 tonnes of gold for the third year in a row, while investors are queuing up for bullion in London vaults. And we’re not just talking about the BRICS countries, Poland has set a goal of 20% of its reserves being in gold, the Czech Republic is multiplying its reserves by 10, within 6 years. When central banks buy tons, the price of gold rises.
6. Unfortunately, the euro is significantly weaker than the dollar, falling below $1.03 at the beginning of the year, reaching its lowest level since October 2022. This is no coincidence. The higher yield of US bonds compared to European ones makes US government securities more attractive to investors. When the US imposes tariffs on a trading partner, investors often sell the currency of that partner, which leads to its depreciation. When investors start to lose confidence in European assets and avoid European government securities, they look for more reliable reserve assets. This further fuels the interest of central banks in gold, which does not carry credit risk. Thus, gold becomes a more preferred asset than both the dollar and the euro. We remind you that 2024 is the first year in which gold overtakes the euro in bankers' reserves. In fact, central bankers trust gold more than the second most traded currency in the world!
7. Trump's policies, which I can define as economic nationalism - a strategy that includes subsidies and tax breaks, protection of domestic industries through tariffs and protectionist policies, as well as high government spending - lead to weaker global economic growth, inflation, and geopolitical instability - ideal conditions for gold to rise.
8. Trump is a radical reformer– Elon Musk’s DOGE has already shaken the depths of the Washington swamp, closing entire federal agencies and laying off hundreds of thousands of civil servants. The scope of the new administration is similar in the international arena. In that case, why not expect shocking reforms in the field of finance? Uncertainty is growing, investors are buying gold, the price is going up.

In fact, in point 7 of what has been stated so far, there is an even bigger rabbit hole and it probably provides additional fuel for the competitive rise in the price of gold since Trump's inauguration. Namely, at the highest level in financial circles, and now quite openly in specialized media and forums, there is talk of a possible radical reform by the new Finance Minister Scott Besant.

It is about the revaluation of the US gold reserves. They are currently recorded in the US national accounts at a price of $42 per troy ounce, given that the current market value is over $2,900, the revaluation could inject over $800 billion into the US treasury through a special agreement. In other words, it could seriously reduce the need to issue new debt to fill the impressive 7% deficit.

Moreover, if Trump allows such a move and does not re-anchor the price of gold in US accounts, but follows the example of most central banks to re-evaluate its value at regular intervals – this will further lead to pluses for both the US Treasury and gold. Imagine a Federal Reserve that again switches to quantitative easing, or money printing, which makes gold more expensive, but also automatically “fills” Trump’s coffers. Monetization of debt plus additional funds available in reserves.

Many institutional investors are preparing for such a possibility, buying gold not only because of the fundamental structural forces driving the price up, but also because of the increasingly unlikely possibility that Scott Besant and his team will produce a monetary reform of historic significance. At the center of this reform would be gold.

For such a plan to have any chance of working, the Federal Reserve chairman will also have to play a key role. The current chairman – Jay Powell – is known for his clashes with Trump during the COVID-19 pandemic, and the feeling of still-strained relations remains. The same is evident from Trump’s comments last month, when the president said that he understands interest rates and monetary policy better than the people at the Fed. Powell’s term expires in May 2026, i.e. if such radical reform moves are going to happen, they are very likely to be possible in the summer of next year. The described scenario also supports Musk’s talk about the need to audit the gold reserves at Fort Knox and other vaults – if you are going to revalue gold reserves, you need to know how big they are.

History shows us that gold always wins in an environment of uncertainty and inflation. 37 years after the fall of the gold standard, gold entered the $1,000 per troy ounce club in 2008. The next psychological barrier of $2,000 per troy ounce took it only 12 years and happened in 2020. Today, five years later, gold has surpassed $2,950 and by all accounts, it will rise further by August. Even Goldman Sachs predicts a price of $3,000 by the end of 2025. Each time a psychological boundary is crossed, the movement to the next one seems to be getting sharper. Eyes are now fixed on reaching the $4,000 price, which was actually in my previous forecasts, by the end of the decade.

Either way, the fundamental reasons for the rise in gold prices are so compelling that the new Trump administration is simply adding rocket fuel to an already raging fire. If the most bullish scenario that is already playing out on Wall Street and in the City really plays out, we could see what is expected for 2030 as early as 2025. And a scenario of $5,000 an ounce before the end of the decade looks increasingly likely.

This article was originally published in Tavex's " Golden Newspaper ", issue 22.

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