Trump’s Golden Gift to the Global Market

October 31, 2025

While it would be an understatement to say that Donald Trump has not been good for the South African economy, he has been a gift to the international gold market. Better yet for the gold market, Trump shows every sign of being a gift that will keep giving with his penchant for economic warfare and for highly unorthodox economic policies.

Since the start of the year, gold has outperformed most major asset classes. From a price of around $2600 at the start of the year, its price has surged to over $4000 at present. That represents an increase of more than 50 percent which is something that has not happened since the late 1970s.

One way that Trump has helped light a fire under gold has been by intensifying the United States’ weaponization of financial policy. Countries deemed hostile to America, like Russia and Iran, have been subjected to the freezing of their dollar assets at US banks.

Meanwhile a whole host of countries have been subjected arbitrarily to punitive import tariffs. Among these countries, Brazil stands out for having been subjected to a 50 percent import tariff for taking legal action against its former president. More recently, Canada has been subjected to an additional 10 percent import tariff for having run an advertisement in the US about tariffs not to Trump’s liking.

Trump’s readiness to use financial sanctions and import tariffs has made his country an unreliable economic partner. This has induced a large number of the world’s central banks to move away from the dollar towards gold in their international reserve holdings. Unlike the dollar, gold is beyond the US government’s reach. This has resulted in a situation where the world’s central banks’ gold holding now constitute 20 percent of their overall international reserve holdings. That is a figure similar to the world central banks’ Euro holdings.

With Trump’s latest action in Colombia and Venezuela, there is every reason to expect that he will continue to use US economic leverage to achieve his political aims. In turn, that is likely to continue undermining the US as a reliable economic partner. By so doing, it will continue the world’s central banks’ flight from the dollar to gold.

More importantly for the gold price’s future outlook, Trump has and will continue to drive investors and the general public to gold by his highly unorthodox economic policies. At a time when the US was already running a 6 ½ percent of GDP budget deficit, recently Trump succeeded in having Congress enact his so called “One Big Beautiful Budget” bill. That bill is expected to add $ 4 trillion to the US budget deficit over the next decade and to put the US public debt on a truly unsustainable path.

According to the IMF, the US will run a 7 percent of GDP budget deficit for as far as the eye can see and by 2030, the US will have a higher public debt to GDP ratio than Italy and Greece.

Currently Trump is in the process of attacking the independence of the central and calling for an immediate 3 percentage point reduction in interest rates.

He is doing despite the fact that inflation is currently running at above the Fed’s 2 percent inflation target and is expected to trend higher as a result of his import tariffs. At the same time, Trump is widely expected to name a monetary policy dove who will do his bidding when Jerome Powell’s term as Federal Reserve Chair ends next May. That is bound to heighten fears that America will not honor its debt commitments but will instead try to inflate its way out of its debt problem.

In the past, fears of US inflation would have driven investors to seek the safe haven of one of the world’s other major currencies. However, today, weak as the dollar’s public fundamentals might appear, those of its competitors in Europe, China, and Japan appear to be troubled as well. With the absence of a real alternative currency to the dollar, investors must be expected to continue their flight to gold.

All of this makes it likely that gold prices will continue their upward journey even they are bound to experience periodic reversals. This might constitute at least some offset to the damage that Trump’s import tariffs are likely to inflict on the South African economy.

AEI