January 21, 2025 - (Gold Market Wire) - Gold has reacted to Donald Trump's return to the White House by moving higher. While at first blanche that may seem counter-intuitive, there are solid reasons for it. The challenges that his Presidency faces, with some fairly daunting ambitions, have done little to quell the uncertainties ahead.

First off, the raft of executive orders have, for many people, restored a semblance of order to the nation. Leaving the WHO, exiting the Paris Climate Accord, freeing the January 6 prisoners, have pleased his supporters. A President actually doing what he claimed he would on the campaign trail is nothing short of an anomaly in the wester political sphere. That should help restore confidence. But his 'ambitions' for Greenland and for the Panama Canal, not to mention border security with Mexico are all challenges of the first order.

The market is still beset by an enormous government debt, in a rising interest rate environment. Trump cannot undo what has been built over decades, and frankly, his previous tenure was bullish for Gold as well. As it stands, along with some grand ideas, his 'DOGE' idea will take years to roll out. Trimming around the edges of the behemoth known as government does not change its foundations, which are - Debt Debt and more Debt. All eyes on the 10-year bond.

But if there is one, single macro-economic event Trump needs to foster, it is the avoidance of deflation. The deflation that sees unemployment soar and the economy tank. Given the amount of debt on board, Trump will likely aim for a stance that encourages inflation. The market is sensing that. Stocks up, Gold up, Oil up (it takes time to 'drill baby'). And this is all before the 'sit down' with Putin. There he will find, one of the few counter-parties, who is capable of pushing back. Until that egg is cracked, the world remains on edge. Europe's plan to 'go it alone' in Ukraine and then, once trapped in war, demand a US involvement, is risky in the extreme. Trump is just the man to tell Europe, at last, "You're own your own."

All of this fits the "long Dollar and long Gold" stance we have had for over a decade.

The monetary sphere is rife with problems. The biggest one coming forth will be the financial solvency of Europe (and the UK). Trump's snub of the UK, by not inviting Prime Minister Starmer to his inauguration is historic. Is Trump really ready to let NATO go?

Then there is the monumental battle between inflationary and deflationary forces setting up. Plenty of grist for the mill, as they say.