Gold prices have trended upward since President Trump took office January 20th of this year. Based on what the Trump administration has set out to do, gold prices may still have a long way to go.
The dollar has been weakening since Trump has taken office. The President has labeled China and a couple other exporting countries as ‘Currency Manipulators’ and mentioned he would take action to stop this. Countries with a significant portion of GDP coming from exports are incentivized to weaken their currencies to make their products less expensive, and thus more competitive in foreign sales.
The Dollar’s weakness shouldn’t come as a surprise, and it wouldn’t be a surprising if the Dollar continues its downward trend. First, Trump is pro-domestic production, wishing to reduce imports and increase domestic product sales abroad. To accomplish this, he wants other countries to stop weakening their currencies and presumably let our Dollar weaken to make our products more competitive for global trade.
Trump’s U.S.-first policy may be a misinterpreted signal by the general market; given we are an import-heavy economy, tightening borders and shrinking the trade deficit actually leans bearish for the Dollar which in turn is bullish for gold.
Second, one of Trump’s campaign promises was to swiftly deport undocumented immigrants from the country. Estimates from the Pew Research Center put this at over 11 million people, which is over 3% of the country’s population.
The political, moral, and even if realistic debate aside, if non-citizen workers vacate lower paying jobs, it could put incredible wage pressure on industries looking to fill those positions with a minimum wage floor and possible benefits. Wage inflation is some pundits’ most important factor in predicting currency inflation. The president may back away from these promises, but if he doesn’t, a sudden 3% population drop can be a big shock to an economy.