Why Goldman Sachs suggests buying gold if Trump wins

Goldman Sachs recently released a report pointing out that investors should buy gold to hedge against inflation if Donald Trump and Republicans sweep the 2024 election. This suggestion stems from the notion that some of Trump's proposed policies could worsen inflation.

Yahoo Finance Senior Columnist Rick Newman joins Morning Brief to discuss the report from Goldman Sachs and what investors should keep in mind as election season heats up.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Nicholas Jacobino

Video transcript

Well, President Biden and former President Trump are set to face off in the first presidential debate of this election cycle in about seven days here.

As the election gets closer, Goldman Sachs out with a new note, arguing that investing in gold could be a hedge against any potential volatility heading into November, particularly in the event of a Republican sweep.

For more on this, we bring in our very own Rick Newman, right?

Great to have you with us in Studio Gold as a safe haven.

What a novel concept.

Yeah, let's examine the interesting premise here, though, so gold is.

I mean, usually, analysts don't tie gold to some political event.

It's it's some kind of upheaval in the economy.

And the premise behind this Goldman Sachs research is that if Trump wins, and especially if Trump wins with a Republican Congress, in other words, full on Trump Republican agenda, we're going to have more inflation than if we were to have a split government or if Biden were to win and a lot of people might be thinking, Wait a minute.

I've been hearing about Biden inflation for the last three years.

Do I now have to worry about Trump inflation.

And the answer is, yes, you do so look at some of the things Donald Trump wants to do.

Number one economic agenda item for him is more tariffs on imported products.

Tariffs are a tax that raise the price.

Rising prices equals inflation.

It really doesn't get any simpler than that.

And then there are a couple of other things a little more complicated.

But Trump has talked about trying to exert political political control over the Federal Reserve.

We know he strongly favours lower interest rates rather than higher rates.

That is the opposite of how you get inflation under control.

That's the reason the Fed has been higher raising interest rates for the last two years.

And then Trump seems to have no concern whatsoever about the $33 trillion national debt.

And he wants to cut taxes even more, add more to the debt, and that is potentially destabilising for financial.

So all of those things that that's the premise behind Goldman Sachs saying, Wow, we might have more volatility, more inflation if Trump wins, and especially if Trump wins with a Republican Congress right position into gold is typically a strategy and investment strategy that you see deployed when there is more time of geopolitical concern here.

So that tying directly back to where Trump would say, OK, I want to lower taxes or have no taxes, but ramp up or ratchet up tariffs as you were, that almost just gets you back into that same mindset of what are the geopolitical?

What are the broader kind of international business concerns that could then come to light as a result?

And, you know, polls show us that Trump has a better reputation for handling the economy than President Biden does.

And polls also show that a lot of Americans think of the trump years as a stable time for the US economy.

Of course, that's before Covid arrived in 2020 changed everything.

Um, and they're sort of right about that.

I mean, we didn't really have any inflation to worry about during the trump years, And so people say, Well, Biden became president, and then we had inflation.

Therefore, the very simple and frankly, too simple logic is Biden created inflation.

That is not the case.

It is a much more complex world right now.

Uh, supply chain snafus related to Covid had a lot to do with inflation.

That was, that wasn't Biden's fault.

And Trump is not going to undo those sorts of things.

We have two wars going on, potentially widening war in the Middle East, a lot more edginess in energy markets because small, small developments based on where we are right now could have an outsized effect on prices.

So Trump is not going to come into office and just magically overnight, we're going to go back to, you know, 1.7% inflation, which we had during the Trump years.

That is not going to happen.

Um, and, uh, you know, this is where Goldman Sachs is coming from, telling their clients, Let's try to get ahead of this and anticipate what might be coming.