If gold managed to withstand the pressure of a strong dollar and high yields on US Treasury bonds, how high can it rise when unfavorable conditions change? The World Gold Council forecasts that demand for the precious metal will remain high in the second half of the year, but for the XAU/USD rally to continue, the bulls will need a new advantage. The WGC sees this in the influx of capital into ETFs.

When the US dollar is the main favorite in Forex and leads the race among the G10 currencies, and Treasury yields rise due to the Fed's reluctance to cut the federal funds rate, gold usually struggles. However, 2024 is different. Due to rising geopolitical risks, high demand from central banks and China, as well as the slowdown in the US economy and inflated deficits and national debt in the States, the precious metal has managed not only to withstand headwinds but also to gain about 13.5% in value since the beginning of the year.

Donald Trump's dominance in the presidential debates has pushed XAU/USD quotes above 2340. The return of the eccentric Republican to the White House is good news for gold for several reasons. Therefore, the rising popularity of the 45th president strengthens the position of the precious metal.

Dynamics of US Presidential Candidates' Ratings

Donald Trump intends to extend the tax relief program he introduced in 2017 for all Americans, not just those with incomes below $400,000 per year, as Joe Biden required. The Congressional Budget Office already forecasts an increase in the budget deficit to 7% of GDP and a rise in the national debt-to-GDP ratio to 99%. The state of public finances will further deteriorate with a Republican in power, which will support gold.

Donald Trump threatens to increase tariffs on American imports for all countries to 10% and for China to 60%. This will exacerbate the already tense relations between Washington and Beijing and lead to the resumption of the trade war. From 2018 to 2020, when such a confrontation between the U.S. and China occurred, gold surged sharply despite the Fed's rate hikes until mid-2019.

According to research from the Peterson Institute, Donald Trump's proposed import tariffs could lead to economic losses amounting to 1.8% of GDP, not even accounting for China's retaliatory actions. This is excellent news for gold as a safe-haven asset.

Thus, a reduction in the federal funds rate could lead to an increase in ETF holdings, and Donald Trump's return to power would be great news for XAU/USD due to the rising deficit and national debt, as well as the slowdown of the U.S. economy and worsening relations with China.

Technically, on the daily gold chart, there is a rise in quotes to the upper boundary of the triangle near the pivot level of $2351 per ounce. A successful breakout of this level would allow for an increase in long positions, which would be formed from $2340. The targets are $2380 and $2430 per ounce.