Gold remains a compelling investment amid ongoing geopolitical risks, fiscal concerns, and anticipated shifts in monetary policy, regardless of the outcome of the upcoming U.S. presidential election, according to Ole Hansen, Head of Commodity Strategy at Saxo Bank.
In a recent analysis, Hansen highlighted that gold has surged 20% year-to-date, peaking at $2,531.75 in August. This performance, which has significantly outpaced the S&P 500 and Nasdaq 100 indices, is likely to continue, he asserts. As of September 10, gold’s gain exceeded 21%, compared to the S&P 500’s nearly 15% and Nasdaq 100’s 12.5%.
Hansen identified several factors contributing to gold’s strength and its expected continued performance through 2025:
Election-Driven Uncertainty: The uncertainty surrounding the upcoming U.S. presidential election is a major factor. Hansen noted that both former President Trump and President Biden have expanded federal deficits without addressing fiscal sustainability, pushing U.S. debt above 120% of GDP. Neither candidate appears poised to implement significant fiscal austerity, potentially exacerbating inflation risks—beneficial for gold.
Trump’s proposed tax cuts, lacking corresponding spending reductions, and a potential Harris administration’s extension of Biden’s fiscal policies could both contribute to a growing deficit during an economic slowdown. Hansen also mentioned that political gridlock with a divided Congress would likely compel the Federal Reserve to adopt more accommodative policies.
Safe Haven Appeal: Gold’s traditional role as a safe haven asset is another supportive factor. Hansen pointed out that a potential recession could signal the end of the current stock market run. This sentiment is reflected in the bond market’s recent ‘dis-inversion,’ where short-term yields fall below long-term yields, indicating expectations for Fed rate cuts.
Federal Reserve Rate Cuts: The anticipated rate-cutting cycle by the Federal Reserve, beginning with its September 18 FOMC meeting, is expected to bolster gold. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, making it more attractive. Historically, gold has performed well during periods of declining rates.
Geopolitical Risks and De-dollarization: Geopolitical tensions and central banks’ de-dollarization efforts also support gold demand. Central bank purchases, particularly by countries like China, and strong retail demand amid global economic uncertainty reinforce gold’s appeal. Hansen noted that a potential increase in tariffs by a Trump administration could further encourage transactions outside the U.S. dollar system, enhancing gold’s attractiveness.
Overall, Hansen emphasizes that the combination of geopolitical uncertainties, fiscal issues, and potential changes in monetary policy creates a favorable environment for gold as a hard asset. While gold is seen primarily as a value-preserving investment rather than a source of significant real returns beyond inflation, its historical performance—averaging an annual return of 8.4% in U.S. dollars over the past decade—makes it a solid choice for long-term investors seeking to maintain purchasing power.
“In light of these factors, investors are likely to continue viewing gold as a hedge against economic and policy uncertainties,” Hansen concluded.
