Gold hits new high again, Trump boosts gold price, will Bitcoin follow suit?

Gold hits new high! On 7/17, the spot price of gold (XAU) surged to a historical high of $2,483, marking a nearly 20% increase year-to-date. In addition to expectations of interest rate cuts, the rise in gold prices is also driven by concerns over Trump's impeachment and increased chances of reelection. Will Bitcoin, often referred to as digital gold, have the opportunity to follow suit?

Rate Cut Expectations Boost Gold Prices

Last Thursday, the U.S. released the Consumer Price Index (CPI), showing a monthly decline in overall inflation rate, currently standing at a year-over-year increase of 3%. Federal Reserve Chairman Powell has also mentioned multiple times that inflation is easing and maintaining high interest rates in the long term could endanger economic growth. Investors generally expect the Fed to officially start a rate cut cycle in September.

Rate cuts are usually favorable for gold prices because the U.S. dollar typically weakens as the U.S. cuts rates, thereby boosting gold prices denominated in dollars. Furthermore, rate cuts will increase the circulation of funds in the market, which is also beneficial for gold prices to rise.

Trump Drives Gold Prices Upwards

The weekend's shocking attempted assassination of Trump has also led to an increase in demand for safe-haven assets such as gold. Starting this week, gold has risen from $2,400 and yesterday hit a historical high of $2,483, marking an increase of over 6% in the past month.

Trump has been advocating for higher tariffs, which economists believe could drive inflation in the U.S. and globally. A report from the Peterson Institute for International Economics estimates that his tariff system could bring an average additional cost of $1,700 per year for middle-income families. The Oxford Economics Research Institute also estimates that Trump's combination of tariffs, immigration restrictions, and extended tax cuts could exacerbate currency inflation and slow economic growth.

Gold is typically seen as a hedge against inflation.

Will Trump's election delay the rate cut? Economists are concerned about a resurgence of inflation. Will there be a change in the Fed chair?

JPMorgan Expects Gold Prices to Continue Reaching New Highs

According to a report from JPMorgan in July, gold prices are expected to continue reaching new highs in 2024 due to geopolitical risks, interest rate prospects, budget deficit concerns, inflation, and central bank purchases.

Based on JPMorgan's research department's estimates, by the end of 2024, gold prices are expected to climb to $2,500 per ounce. In 2025, it is projected to reach $2,600 per ounce, with the premise being that the Fed will start cutting rates in November.

Will Digital Gold Bitcoin Keep Up?

How has Bitcoin, often referred to as digital gold, performed? In fact, Bitcoin's trend this year has been very similar to gold. The blue line in the chart below represents gold, while the orange line represents Bitcoin's trend. Following the Trump attack, Bitcoin rose from $57,000, and Trump's crypto-friendly stance also boosted the price trend. Bitcoin was reported at $64,648 before the deadline, and has risen over 10% since the weekend.