UBS seems to be suggesting that gold is a buy now and the reasons to buy gold are very much intact (see images below). They site much is unknown about what Trump will actually implement, the market currently is pricing in lop sided risks (ie share market is ignoring other risks), further increases in US government debt which is expected to increase at a faster pace (UBS state 'sharp increase') than under Biden according to economists, impact of tariffs may benefit gold and Fed lowering interest rates. If Trump implements his full agenda it will be very inflationary especially if the Fed bows or is forced to comply with Trump's wishes on interest rates (ie lower interest rates) which should be very beneficial for the POG. UBS stated:
"Investors need to remember that much is still unknown about Trump’s policy agenda, including which existing policies might be reversed. This uncertainty is very much double-edged, especially given the market’s lopsided pricing in of risks."
UBS comments make sense to me - Trump has shown in the past he is very unpredictable so who knows what he will actually do. I would also add that central bank buying is not going to stop and may actually increased if Trump implements his high tariffs and also if the pace of US government debt escalates under his administration. Moreover, if Trump passes legislation to reduce regulation, while some of the changes may be positive, some will increase risks in the banking and financial system - look what happened in the GFC due to poor regulation of the financial system.
The increase in bond yields eg 10 year is now 4.48% up from 3.64% in September is a big waring sign.
My own view is that POG may see further falls at least in the short term and may even go below $US2,400 (my speculation) - if SPR falls below $1 it will be buying season again.
One other comment - I have very serious reservations about the extent to which they will be able to trim the public sector - most of the cost of the public sector is not staff but the cost of the services - eg social security payments, medical benefits and defence equipment and combat troops. Trimming public sector staff will only make a dent in government spending relative to tax cuts. Talk of cutting spending by $2tr is fairy land stuff unless they pass major pieces of legislation to reduce services and there will be huge opposition to major cuts even from some Republicans and it will take quite a long time to pass the legislation.
SPR Price at posting:
$1.10 Sentiment: Buy Disclosure: Held
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