U.S. President Donald Trump has intervened verbally classifying the dollar as too strong. A weak greenback is generally considered a buying argument for gold. But there is more to the story.

This week, U.S. President Donald Trump, in an interview with the Wall Street Journal, viewed the course of the U.S. currency as too strong and praised the low-interest policy of the American central bank (Fed). Even backing a second term for Fed CEO Janet Yellen, after previously criticizing the top currency guard during the election campaign. On hearing the comments many investors then separated from their dollar positions.

A weaker greenback makes gold abroad cheaper and increases demand. Since the start of the year, the price has risen by 12 percent and thus roughly three times as much as the Dow Jones.

Russia, Syria, North Korea and Le Pen

Gold is also supported by other, particularly geopolitical, influences: the dispute whether real or concocted, between the U.S. and Russia on Syria and the sabre rattling between the U.S. and North Korea have caused a lot of uncertainty amongst investors and pushed them into safe havens like gold.

The upcoming elections in France on 23 April are also driving the financial community into safe boltholes such as gold. According to recent surveys, the presidential candidates Emmanuel Macron and Marine Le Pen are neck and neck.

If the top candidate of the right-wing populist Front National comes out on top, then the future of the Euro will be tested more than ever before. Le Pen intimating the departure of France from the Eurozone would lead to an uncertain future for the collective and will therefore continue to support gold as an alternative currency.

UBS as Advocate

Such crisis scenarios naturally unearth bullish gold analysts from the shadows. Thus, recently, UBS reported that gold is likely to receive good support following a consolidation phase in the face of geopolitical uncertainties and upcoming French elections. However, UBS analysts are not calling a price target.

In addition, the concerns about Trumps economic policy are growing. Should the U.S. president not be able to get through his well publicized «drastic reduction» in corporate taxes, this would be bad news for the stock exchanges that have already become bloated on the back of Trumps announcements. In return, the gold price is likely to grow.

And the Interest?

The question remains on how interest rates will develop. If the interest rates rise, this generally has a dampening effect on the gold price, since the precious metal itself does not yield interest.

Interestingly, however, the past three interest rate hikes in the U.S. have not been able to curb the gold price. And this will continue as long as real interest is lower than inflation.