Why Trump and Powell will send gold prices skyrocketing

The backdrop is fertile for gold prices to stay smoldering.

In case you have been living under a giant gold rock, the price of the yellow metal has surged about 11% to $1,413 an ounce in the past 30 days. Credit for the out-of-the-blue rise — which has also extended to gold mining stocks such as Barrick Gold (GOLD) (up 36% past month) — goes to President Donald Trump and his hand-picked Federal Reserve Chair Jerome Powell.

The administration’s escalating trade war with China has sent investors piling into the often viewed safe haven, gold. Meanwhile, thinly veiled promises by Fed officials since May have sent the U.S. dollar tanking. As is normally the case, when the dollar weakens considerably investors flock to gold as it’s seen as a store of value.

“Although we haven’t had a Fed rate cut yet, we have expectations that real interest rates will go lower and that typically means gold prices on the rise. I think this move is here to stay,” GraniteShares CEO Will Rhind said on Yahoo Finance’s The First Trade. Rhind added that fear among investors is also one part of the latest pop in gold prices.

Rhind doesn’t rule out gold prices above $1,500 an ounce in short order, but concedes to not having a price target.

Goldman Sachs is on board with that analysis, too. Analysts at the investment bank wrote in a new note Wednesday that a combination of a weak dollar and rising global uncertainties could keep gold prices hot. Goldman raised its 12-month gold price forecast to $1,475 an ounce from $1,425 an ounce.

“Goldman could be conservative at this stage,” Rhind said.

Brian Sozzi is an editor-at-large and co-host of ‘The First Trade’ at Yahoo Finance. Follow Brian Sozzi him on Twitter @BrianSozzi

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