Gold Rises on the 'Trump Effect'

Gold , the metal that investors turn to in times of uncertainty, has experienced a significant rise in value. As of June, it has gained 3.0% compared to the end of May, positioning itself close to the $3,400.0 USD mark. Currently, its price stands at $3,387.0 USD, marking a 1.0% increase in the session and an impressive 29.0% cumulative return since late 2024. This surge is largely attributed to the reemergence of Donald Trump in the political arena.

The primary catalyst for this recent gold surge is Trump's announcement regarding his trade policy. The former president, eyeing a potential return to the White House, has expressed his intention to implement unilateral tariffs on trade partners within the next two weeks. This announcement has sent ripples of uncertainty through global markets, rekindling fears of a potential trade war, which historically boosts gold's appeal as a safe haven.

Periods of global trade uncertainty and heightened geopolitical risks increase the allure of gold due to its status as a refuge asset. With the current trade policy narrative unfolding, a volatile stock market environment is anticipated, which benefits gold. Investors are turning to the yellow metal to shield their capital from fluctuations and risks inherent in trade tensions, reinforcing its role as a protective asset.

While Trump's announcement is a key factor, other elements also support gold's rise. A recent U.S. inflation report showing signs of moderation strengthens expectations that the Federal Reserve might cut its benchmark rate by year-end. A lower interest rate environment makes gold more attractive as an investment opportunity, reducing the opportunity cost of holding a non-interest-bearing asset. Additionally, geopolitical tensions in the Middle East, with reports of a potential Israeli operation against Iran and Iran's announcement of a new uranium center, have also contributed to increased risks and, consequently, gold's appeal.

Looking ahead, market consensus projects that gold's price could reach $3,600.0 USD by the end of 2025, implying a potential 6.5% return. This projection, revised upward from the previous $3,500.0 USD, underscores the expectation that current factors will persist. Key factors to watch in the coming months include the development and implementation of U.S. trade policy with other countries, as well as other factors related to its status as a "safe haven" asset in a more volatile environment.

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