Gold volatility remains high and continues to be affected by uncertainty about the new Trump administration. However, the U.S. dollar will weaken in 2025, which will provide support for gold, and the overall upward trend in gold prices will continue.
While Trump's "America First" policies may provide some support for the dollar at the start of the year, it will be difficult to maintain the momentum as government deficits continue to grow; debt is likely to increase, which should weaken the dollar.
Meanwhile, the Fed's easing cycle should push bond yields lower, another tailwind for gold prices.
"Now that we are back in a rate-cutting environment, bond yields are falling and investors are once again ready to buy gold," he said in his latest research note.
Although has a positive attitude towards gold, he also believes that there is an upper limit to the rise in the price of gold in 2018. He expects that by the fourth quarter of 2019, the price of gold will be around 2850 US dollars.
He said: "This is still a very favorable situation for gold. Initially, I did have a forecast of 3,000 US dollars, but according to my latest modeling, this requires a sharp drop in bond yields from the current level."
Although it is expected that the bond yield will decline, but Shah said, there are certain limitations in terms of savings, currently the interest rate is expected to be between 3.25% and 3.50%.
He pointed out that many of the policies proposed by Trump, including tax reduction measures, are considered to have an inflationary effect. At the same time, lower tax rates will also increase government debt.
From the point of view of the United States' monetary policy, Shah said, due to the political uncertainty that continues to support the global financial market's de-dollarization trend, he has a positive attitude towards gold prices.
Although compared to recent years, the country's local government may purchase more gold.
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