Trump rate cut talk pushes gold price to new highs

It sounds wild, but that’s exactly what markets are whispering. President Donald Trump is now calling for a jaw-dropping 300 basis point interest rate cut - the biggest in US history by a mile. While that’s raising plenty of eyebrows, one asset is quietly loving the chaos: gold. With safe-haven demand climbing and inflation risks back in the spotlight, could this be the moment gold makes a run at $5,000?

Trump’s interest rate cut push

To put it plainly, a 300-point cut would be three times larger than the Fed’s record-breaking 100 bps slash in March 2020, during peak pandemic panic. Back then, gold soared, the dollar sank, and investors braced for inflation. 

Now? Trump is pushing for a cut of that magnitude in a growing economy. The US is not in recession. In fact, GDP is running hot at 3.8% year-on-year.

Yet Trump argues that high interest rates are costing the US dearly in debt servicing - over $1.2 trillion annually, or roughly $3.3 billion a day in interest payments. 

According to Trump, every 1% cut could save around $360 billion on $36 trillion in debt. But that number’s a bit fuzzy. In reality, only publicly held debt (about $29 trillion) is affected, and not all of it can be refinanced overnight. 

Still, according to experts, the math points to potential savings of $870 billion per year if a full 3% cut were applied. More realistically, if just 20% of the debt is refinanced in year one, it could still shave off $174 billion - not pocket change.

Gold safe haven demand rises amid trade tensions

While markets digest the economic logic, gold has quietly rallied for three days straight, edging towards the top of its weekly range. Behind the scenes, Trump has also reignited a full-blown trade war, issuing more than 20 tariff notices in just one week, including a 35% tariff on Canadian imports and steep duties on Brazil and copper.

Investors are understandably jittery. Trade tensions are typically bad news for global growth, but they’re great news for gold. The yellow metal thrives in times of uncertainty. Add a falling US dollar (down over 10.8% in Q1 and Q2 - its worst start to a year since 1973), and the mix becomes even more gold-friendly.

The Federal Reserve interest rate factor

Normally, rising gold prices would coincide with growing expectations for a Fed rate cut. But here’s the twist - those expectations have cooled. The Fed’s latest meeting minutes showed division among officials. Some want cuts soon. Others see no urgency at all.

On one hand, San Francisco Fed President Mary Daly suggested rates could come down eventually, saying current policy remains restrictive. On the other, St. Louis Fed President Alberto Musalem struck a more cautious tone, warning it’s too early to gauge the full inflationary impact of tariffs. And Christopher Waller, a known dove and possible Powell successor, called for an early cut - but insisted it wouldn’t be political.

For now, the Fed seems stuck between strong job data and inflation risk. Initial jobless claims recently fell to 227,000, beating forecasts and signalling labour market resilience. That’s made the central bank wary of cutting too soon - even as Trump turns up the heat.

Gold forecast: Could it really hit $5,000?

Here’s the bullish case. If the Fed were to follow through on Trump’s wishes (or even partially), it would likely:

• Drive the dollar lower
  
• Ignite inflation expectations
  
• Stoke a safe-haven rush
  
• And potentially send gold on a parabolic move
  

Some analysts believe this scenario could send gold past $5,000 per ounce, especially with ongoing trade disruptions and global policy divergence in play. Gold is already up 40% over the past year, and 80% over five years - momentum is on its side.

And if all that sounds familiar, it’s because we’ve been here before. Post-2020, rate cuts and stimulus pushed gold to then-record highs. The environment now may be different, but the cocktail of trade wars, political drama, and central bank pressure is starting to taste a lot like déjà vu.

Gold technical outlook

Trump’s 300-point rate cut proposal might never happen, but the mere suggestion of it is reshaping market psychology. It’s fanning the flames of inflation fears, weakening the dollar, and bolstering demand for assets like gold.

So could gold hit $5,000? If the stars align, rate cuts, trade wars, a softening Fed, then yes, the path is there. Whether or not it takes that path is the real story investors will be watching.

At the time of writing, Gold is seeing a significant uptick within a sell zone, hinting that the uptick may be curtailed. However, the volume bars indicate waning sell pressure, hinting at a potential uptick. If we see an uptick, prices could be held at the $3,365, $3,395, and $3,450. Conversely, if we see a slump, prices could find support at the $3,300 and $3,250 support levels. 

Could gold hit 5K?  You can speculate on the price of Gold with a Deriv MT5 or Deriv cTrader account.

‍