Rua Gold Inc. (TSXV: RUA, OTC: NZAUF, WKN: H8E)
An Emerging Gold Explorer with Two Highly Prospective Land Packages in New Zealand’s historical gold fields.
As the assassination attempt on former U.S. President Donald Trump increased political uncertainty, further boosting safe-haven demand for the precious metal, the gold price hit a new record high again on Tuesday (16 July) intraday. Prior to this, the expectation of Federal Reserve September rate cut is pushing the price of gold higher for three consecutive weeks.
Market participants pointed out that, the ‘rate cut trade’ and ‘Trump trade’ together pushed gold prices to new highs this week, while gold’s role as a safe haven and value storage in the current market environment more prominent. At the same time, another key demand category of gold ETFs after three years of capital outflow again appeared capital inflow.
According to the World Gold Council, gold ETFs saw an inflow of $500 million, or 7.6 metric tonnes, last week, which boosted investors’ long confidence to a large extent.
However, some analysts have pointed out that Trump’s election as president may not be all good for gold, as Trump has declared his intention to step up trade protectionism and promised tax cuts, and has threatened to fire Federal Reserve Chairman Jerome Powell and replace him with someone who is more lenient on monetary stimulus.
Gold has done well over the past two years despite even high inflation and Fed rate hikes. But Trump’s inflationary policies will cause the Fed to re-hike rates rather than cut them, which could be disastrous for the gold price. Michael Metcalfe, head of macro strategy at State Street Global Markets, says: ‘There is a greater risk that Trump’s policies in his second term will be more inflationary than in his first.’
At the same time, Trump’s trade war may lead to more countries, including the BRICS and some Middle Eastern countries to join the ‘de-dollarisation’ camp. And determined buying by central banks has been a key factor behind the highs that have supported the price of gold over the past two years.
John Higgins, chief market economist at Capital Economics, wrote in the report that Trump’s election victory is not good news for the US stock market, as his proposed tariffs and immigration policies would spell disaster for the US economy. This will also make the Fed in a dilemma: on the one hand, Trump’s trade and immigration policies will lead to a slowdown in the U.S. economy, resulting in greater pressure on the Federal Reserve to cut interest rates; but on the other hand, rising inflation will compress the potential space for the Fed to cut interest rates.
Capital Economics believes that if Trump wins the 2024 election, the Trump administration is likely to burst the stock market bubble earlier, leading to an earlier crash in U.S. stocks.
Considering the various uncertainties in the US economy, monetary policy and the global trade landscape, geopolitics, etc., it should be a good time to invest in gold and silver.
