Top 'Trump Trade' Isn't The Dollar But Gold As Survey Participants Foresee 'Severe Disruptions To Markets And Trade'

Gold has emerged as the top choice for investors looking to hedge their portfolios in the event of a potential second term for Donald Trump.

What Happened: The precious metal has been identified as the best hedge against a possible Trump presidency, according to a Bloomberg Markets Live Pulse survey. The survey, conducted from Jul. 22 to Jul. 26, included 480 respondents.

Over 60% of the participants believe that the U.S. dollar would weaken if Trump secures another term. This view is supported by the historical performance of the dollar, which slid over 10% while the price of gold surged over 50% during Trump’s previous tenure.

Trump’s proposed policies, such as tax cuts, tariffs, and reduced regulations, are seen as inflationary by Wall Street and could potentially prompt the Federal Reserve to raise interest rates. A Republican victory in the November elections, granting Trump more leeway to implement his economic policies, could further drive up gold prices.

JPMorgan Chase & Co. analyst Gregory Shearer noted that geopolitical tensions, the growing U.S. deficit, and inflation hedging have driven gold prices higher. These factors could be magnified under a Trump presidency or a Republican-controlled Congress.

Survey respondents echoed this sentiment, with one stating, "All I can see are severe disruptions to markets and trade, and rapid increases" in the U.S. national debt.

"When the US is creating its own risk premium due to a potentially disorderly election, the fiscal implications of a Trump presidency, that makes the dollar in 2025 a risk," said Kathleen Brooks, research director at XTB.

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Why It Matters: The 2024 presidential race has been thrown into uncertainty following President Joe Biden's decision to step down, endorsing Vice President Kamala Harris. This has led to speculation about the future of the "Trump trade," a term referring to market strategies that would benefit from a potential Trump return to the White House.

Former President Trump has criticized the current economic state under Biden, blaming the administration for inflation issues and claiming that the stock market is only enriching the wealthy.

With the upcoming election, defense stocks are also seeing significant attention, as investors weigh the potential impacts of a Harris or Trump presidency on various sectors.

Price Action: Gold Spot prices rose by 0.23% to $2,392.61, reflecting an increase of $5.54. Meanwhile, the U.S. Dollar Index saw a slight decline on Friday’s market close, dropping 0.11% to $104.20, according to data from Benzinga Pro.

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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote