(Kitco News) - The odds of Former President Donald Trump regaining his position in the White House have increased significantly following last week’s assassination attempt. While a political shift in the U.S. could impact the global economy, it will continue to support gold prices, according to one market strategist.
In an interview with Kitco News, Thorsten Polleit, Honorary Professor of Economics at the University of Bayreuth and publisher of the BOOM & BUST REPORT, said that the scenario of Trump becoming President again is extremely likely.
He explained that specifically, he sees Trump pushing for peace between Ukraine and Russia, which would ease some military confrontations in the world; however, the global economy will continue to navigate trade barriers and deglobalization.
“At some point, we will see a resurgence in global trade and globalization, but it will be a while, and in the meantime, there will still be a lot of uncertainty,” he said.
Along with escalating trade wars, Polleit said that emerging market nations will also remain concerned that Western nations could further weaponize the U.S. dollar. He added that central banks will continue to diversify away from the U.S. dollar and into gold.
“Gold is re-establishing itself as the ultimate means of payment,” he said. “This fiat dollar problem is becoming bigger by the day.”
Looking specifically at China, Polleit said that he expects the government to continue buying gold, even if it doesn’t officially announce its purchases. Data from the People’s Bank of China shows that it didn’t increase its official gold reserves in May and June, ending an 18-month shopping spree.
“Regardless of whether they announce their purchase or not, China will have to keep buying gold because they don’t have another reserve currency.”
As to where gold is going, Polleit said that he could easily see gold prices up another 10% to 15% in the next six to 12 months, as central bank gold demand coincides with easing from the Federal Reserve.
“I still see a lot of potential for gold prices. There is still an opportunity for investors to build a profitable position in gold. If you are a long-term investor, you would do well to build up your gold position now.”
Looking at gold in other currencies, Polleit noted that in the last four years, gold prices against the Japanese yen have doubled.
“It’s just a matter of time before we see the same type of value against the U.S. dollar, euro, pound, and every other major currency,” he said.
Along with further support from central banks, Polleit said that gold’s rally could see an even more dramatic rise depending on what the Federal Reserve and other central banks do.
Polleit pointed out that a contraction in the money supply has helped push inflation down; however, he added that as monetary policy starts to ease, this trend is expected to reverse.
“As rates go down, the economy keeps growing and the money supply continues to flow. That is actually a very, very favorable environment for gold,” he said.
As for how much gold investors should hold, Polleit recommends holding 30% of your portfolio in precious metals: 80% in gold and 20% in silver.
