Trump's inauguration is considered positive, and overseas institutions are optimistic about gold prices
Donald Trump is about to be sworn in as President of the United States, and the world is bracing for new uncertainties. Analysts at BMO Capital Markets say that Trump's repeated mentions of tariff adjustments and an "America First" approach suggest his administration may bring a new wave of inflation. This week, the spot price of gold in London attempted to break through the $2700 per ounce resistance level. BMO is optimistic about the outlook for international gold prices; among commodities, gold is one of the few that BMO favors in 2025. Gold can effectively hedge against inflation, geopolitical uncertainty, and stock market risks. It is expected that gold purchases will continue to increase as central banks reduce their reliance on the US dollar and add to their gold reserves. BMO anticipates that if Trump raises tariffs and increases US federal government spending, the resulting inflationary pressure could push down real interest rates, weakening the appeal of short-term bonds' risk-free returns. Bank of Montreal (BMO) points out that AI investment has pushed the S&P index to its highest price-to-earnings ratio since the dot-com bubble. If the rollout of AI reaches the limits of infrastructure capacity in the coming years, this could not only lead to a devaluation of the US dollar but also to a larger federal deficit—both scenarios are hedged against by gold. At the same time, the bank remains optimistic about China's physical gold demand.
Time:
2025-01-16 07:43
Donald Trump is about to be sworn in as President of the United States, and the world is bracing for new uncertainties. Analysts at BMO Capital Markets say that Trump's repeated mentions of tariff adjustments and an 'America First' approach suggest his administration may bring a new round of inflation.
London spot this week Gold price attempted to break through the $2700 per ounce resistance level. BMO is optimistic about the outlook for international gold prices; among commodities, gold is one of the few commodities BMO favors in 2025. Gold can effectively hedge against inflation, geopolitical uncertainty, and stock market risks. It is expected that gold purchases will continue to increase and add to gold reserves as central banks reduce their reliance on the US dollar.
BMO anticipates that if Trump increases tariffs and increases US federal government spending, the resulting inflationary pressure could push down real interest rates, weakening the attractiveness of the risk-free return of short-term bonds.
The Bank of Montreal (Bank of Canada) points out that artificial intelligence investments have pushed the S&P index to its highest price-to-earnings ratio since the dot-com bubble. If the rollout of artificial intelligence reaches the speed limit of infrastructure constraints in the coming years, this could not only lead to a devaluation of the US dollar but also to larger federal deficits, both of which are hedged by gold. At the same time, the bank remains optimistic about China's physical gold demand.
BMO currently projects the average international gold price in 2025 to be around $2750 per ounce, slightly higher than previously predicted. The international gold price in 2025 may peak in the summer, with the average price in the third quarter possibly reaching around $2850 per ounce.
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In fact, as gold prices fluctuate, Wall Street's major banks have recently shown a clear divergence in their views on gold prices. Unlike Goldman Sachs and Deutsche Bank, which are optimistic about gold's performance, Citigroup believes that the long-term outlook for gold prices is not optimistic.
Although gold prices rose this week, market volatility has clearly increased. While the US-UK agreement is symbolic, its content is limited and insufficient to alleviate concerns about a global economic slowdown. Therefore, gold prices will continue to fluctuate between safe havens and policy signals, closely monitoring the Federal Reserve's interest rate expectations and global trade sentiment.