On 28 February, Trump’s address to Congress, even though not offering any specific details on his promised fiscal policies, was well received and pushed the USD and bond yield higher putting pressure on gold.
While the US Federal Reserve (Fed) will increase rates this year, inflation will remain stubbornly high, maintaining a low real rate environment. Gold prices could rise 8% in the first half of the year, aided by a weaker US Dollar (USD). However, USD strengthening in the second half of the year and subdued enthusiasm for the metal in the futures market could drive a sell-off, with gold ending the year at US$1230/oz, just 2.5% higher than today.
After dropping for seven consecutive weeks following Donald Trump’s election, gold started staging a relief rally at the end of December as the dollar consolidated, bond yields took a breather and the equity markets ebbed and flowed. Add to that some bargain-hunting as well as support from traditional buying in China ahead of Lunar New Year.