Trump's Return to the White House and a 2025 International Gold Price Outlook

In the past few years, after experiencing the global pandemic shock from 2020 to 2022, the global economy has been hit by a wave of deglobalization and numerous "black swan" and "grey rhino" events, facing enormous uncertainty. Especially in 2024, the US presidential election was turbulent, US domestic economic data was unpredictable, the Fed's monetary policy shift was hesitant, great power games further escalated, the EU's internal rifts widened, the Russia-Ukraine conflict dragged on, and the Palestine-Israel conflict escalated and expanded. The superposition and resonance of multiple factors have pushed the global economy into uncharted waters fraught with peril and hidden dangers.

Figure 1: Trend of New York gold price from January to November 2024. Source: Sina Finance

From early January to the end of October 2024, the price of gold in New York rose by about 35%, shocking the world. On November 6, 2024, the 47th US presidential election confirmed Trump's victory, and the price of gold in New York fell from $2752.6 per ounce at the opening to $2677.8 per ounce, a daily drop of 3.1%. From the end of October to November 12, 2024, the price of gold in New York fell from a historical high of $2801.8 per ounce to $2625.7 per ounce (opening price on November 12), a correction of 6.29%.

Has the current bull market in the global gold market ended?

I. The Unprecedented Great Transformation Presents Six Major System Reconstructions

The author believes that since the outbreak of the global pandemic in 2020, the original global industrial division of labor, economic and trade relations, and supply chain system have been undergoing profound changes.

Figure 2: Reconstruction of six major systems in the context of global changes

This is mainly reflected in six aspects: the reconstruction of the global new and old energy system driven by China as the global leader in the clean energy industry; the reconstruction of the global manufacturing system caused by the accelerated penetration of artificial intelligence and changes in national division of labor; disputes in the global commodity and trade system caused by the wave of deglobalization; the disintegration and regression of the global supply chain system caused by the US Inflation Reduction Act; the division of the global payment system caused by the sanctions imposed on Russia by the United States; and the pain and risks in the global financial system caused by the ebb and flow of the dollar and the US debt crisis.

The cross-impact of the above six aspects of multiple variables and risk events has increased the uncertainty of the unprecedented great transformation in the world, while also shaking the dominant position of the dollar in the global trade and payment settlement system to varying degrees, strengthening the urgency of "de-dollarization" transactions in more countries around the world, and accelerating the "de-dollarization" process of economic and trade exchanges among BRICS countries.

Gold, as an important international safe-haven asset and an important component of foreign exchange reserves of various central banks, is becoming increasingly strategically important in today's increasingly complex and volatile international situation.

II. Trump's Return May Highlight Gold's Super-Monetary Attributes

Figure 3: Policy orientation and impact after Trump's return

Figure 4: Impact of Trump's "smile curve" on the US economy

From Trump's previous presidential term and the policy direction announced during the 2024 presidential election, it is not difficult to predict that "America First," "unilateralism," and "vigorously stimulating the US domestic economy" will be the inevitable choices of Trump's second term. With Trump's return and a major reshuffle of the US government, if the Republican Party can simultaneously control both houses of the US Congress, in addition to the Supreme Court justices previously recommended by Trump, Trump may "take sole control" and "do as he pleases" at the beginning of his second term.

Judging from Trump's long-standing attitude towards the Federal Reserve, in the first half of 2025, even if US domestic economic data does not show a significant weakening or deterioration, Trump will continue to pressure the Fed to cut interest rates, or even accelerate the pace of rate cuts, and a weak dollar may appear relatively quickly. In the second half of 2025, under the influence of the Fed's loose monetary policy, coupled with the US government's substantial tax cuts (increasing the risk of US government fiscal deficits and debt defaults), restrictions on foreign immigration (raising the cost of labor for US companies), increased tariffs on imported goods (especially significantly increasing tariffs on Chinese exports to the US to 60%-200%), and simultaneously triggering trade frictions with European and Asian countries and renegotiating trade agreements with Mexico and Canada in the North American Free Trade Agreement, it is highly likely that the US economy will face greater inflationary pressure, and the Fed may be forced to abandon its loose monetary policy. During this period, the Trump administration's strong support for the US traditional energy industry, such as the large-scale production and consumption of US domestic crude oil, shale oil, and shale gas, to replace imported oil and gas, may offset some of the inflationary pressure in the US.

It is foreseeable that in 2025, as Trump returns to power, a weaker dollar has become a highly probable event. Coupled with a series of trade frictions that the US is about to launch and Trump's strong advocacy for the return of manufacturing to the US, the global supply chain and trade system may face even greater shocks and challenges. The status of the dollar as a crucial international payment settlement and reserve currency will also continue to decline, and the importance of gold as a reserve for central banks and private sectors will further increase and become more prominent.

III. Outlook and Preliminary Analysis of International Gold Prices in 2025

The author believes that from November to the end of 2024, international gold prices may experience a temporary pullback and profit-taking due to institutional investors cashing out due to factors such as the realization of Trump's trade deals (the end of the Russia-Ukraine conflict after Trump's election, the easing of the Palestine-Israel conflict, and the explosive trading of digital currencies (represented by Bitcoin) siphoning funds). However, the current bull market in international gold prices has not completely ended, and $2500-$2650 per ounce may be a key price range for consolidation. The specific situation needs to be observed based on the results of the Fed's December 2024 interest rate meeting.

In the first half of 2025, if the Fed, under pressure from Trump, continues to cut interest rates or accelerates the pace of rate cuts, international gold prices may resume their upward trend after a period of consolidation. However, considering the combined effects of a series of policies implemented after Trump's inauguration, in the first half of 2025, international gold prices may still have an upside potential of around 20%, possibly rising to $3000-$3200 per ounce in the summer of 2025 before peaking and completing this round of bull market. However, it is necessary to closely monitor the reaction of US domestic economic data after the implementation of Trump's multiple policies, the pace and progress of the Fed's interest rate meetings, the fluctuation trend of the three major US stock indexes and digital currencies, and key geopolitical events that affect the global economic trend.

In the second half of 2025, international gold prices may cross the turning point and shift from a bull to a bear market, experiencing a significant and deep price correction. However, against the backdrop of "de-dollarization" by countries around the world in recent years, a significant correction in international gold prices may open a window for central banks to resume increasing their gold reserves. Therefore, in the second half of 2025, during the decline in international gold prices, the increase in gold reserves by central banks may provide corresponding price support.

IV. Impact of International Gold Prices on the Development of the Domestic Gold Market

(I) Before the Spring Festival of the Year of the Snake in 2025

According to data from the China Gold Association, China's gold consumption in the first three quarters of 2024 reached 741.732 tons, a decrease of 11.18% compared to the same period in 2023. Of this, gold jewelry accounted for 400.038 tons, down 27.53% year-on-year; gold bars and coins totaled 282.721 tons, up 27.14% year-on-year; and industrial and other gold uses amounted to 58.973 tons, down 2.78% year-on-year.

In the first 10 months of 2024, as domestic gold prices continuously hit record highs, sales of gold jewelry and gold bars and coins showed a divergence: consumption of gold jewelry, with higher premiums, decreased significantly, while consumption of gold bars and coins, with relatively lower premiums, increased significantly. The significant fluctuations in high gold prices have increased the operational risks for domestic gold processing and sales companies, leading to reduced purchases by wholesale and retail companies and a significant decrease in processing volume for jewelry manufacturers.

Since gold consumption before the Year of the Snake Spring Festival in 2025 (January 29, 2025) will mainly concentrate from mid-November 2024 to the middle of January 2025, a brief recovery may occur given the backdrop of falling international gold prices and strong consumer stimulus measures in the third quarter of 2024 in China.

(II) First Half of 2025

However, in the first half of 2025, against the backdrop of international gold prices resuming an upward trend and hitting new highs, coupled with the domestic gold market being in the off-season, domestic gold processing and retail companies may face even greater market and operational pressures.

Especially if Donald Trump returns to the White House on January 20, 2025, beginning his second term as US President in the first half of 2025, he may force the dollar to weaken and impose additional tariffs.

The domestic price of gold raw materials is likely to exceed 700 yuan/gram in the first half of 2025, especially in the second quarter, and may even exceed 750 yuan/gram in extreme cases. This will be a major negative factor for domestic gold jewelry processing, wholesale, and retail companies.

(III) Second Half of 2025

Because the gold market generally favors buying high and not low, as international gold prices surpass the peak of this bull market in the summer of 2025 and then rapidly fall, domestic gold jewelry processing and sales companies will need to withstand the significant pressure of a marked decline in gold product sales and the repurchase of gold from consumers in the third quarter of 2025. This pressure will only ease towards the fourth quarter of 2025 when the downward trend in international gold prices slows and the peak consumption season before the Year of the Horse Spring Festival in 2026 arrives (the actual recovery of domestic gold consumption will need to be observed at that time).

Therefore, the fierce market competition, accelerated industry reshuffling, and survival of the fittest among domestic gold jewelry, gold bars and coins design, processing, wholesale, and retail companies in 2024 may continue into 2025.