Gold: Trump Declares War on Powell, Strong USD

TL/DR

• Trump’s Economic Reality: While the plan is ambitious, political constraints and market dynamics suggest compromises are inevitable.
• Weak Dollar is Central: If tariffs cannot be implemented, a weaker dollar becomes the primary tool for achieving Trump’s growth agenda.
• Market Implications: Investors are already adjusting to this reality, with dollar weakness leading the charge. The USD will weaken, Gold and Silver will continue rallying

Outlook for Gold, Silver, and the Dollar

• Gold and Silver: Prices will likely remain influenced by dollar movements. If the dollar weakens further, both metals should see more upside even though their downside ignored USD strength this past year.
• The Dollar: The market is already pricing in the challenges Trump faces in implementing his full agenda. A weak dollar *strategy* appears increasingly likely as a fallback to support exports and mitigate political resistance.

Intro: Trump Declares War on the Fed

Good morning. In light of Trump's statement yesterday, in the attached video, strongly conveying his desire for lower rates and suggesting that Fed Chair Powell will give him those lower rates, this is very timely. War has effectively been declared on the Fed as part of Trump's plan to make America great again, fiscally. The simple point is this:

If Trump cannot get his agenda implemented successfully, this creates a dilemma. Even if he does implement it fully and successfully, as he envisions, the U.S. will still need a weaker dollar to make it work. This is all part of exporting, mercantilism, and addressing current account deficits.

Yesterday's comment by Trump on rates and Powell's expected compliance reflects a telegraphed attempt to get ahead of the fiscal pushback anticipated as his plan is implemented. When you combine all the factors— all the moving parts that Trump needs to work—if the country becomes less comfortable with deficit spending, which is a hallmark of what he's proposing, then congressmen and senators will not support it. Without additional deficit spending in conjunction with raising tariffs to lower taxes, Trump must have a Plan B to facilitate export growth.

That Plan B is an overt attempt to weaken the dollar. Trump's comments in the video are the first shots fired in a war with the Fed, a conflict that will ebb and flow based on his own policies' progress. The conversation around these dynamics began filtering into markets right after his inauguration.

At that time, the dollar dropped 160 points, then rebounded, but now it's back down and below those levels. The moral of the story is this: Besant, his treasury nominee, had made comments before his nomination on what he believes will and will not work under the MAGA framework. His belief is that a weaker dollar now will lead to a stronger dollar later. Conversely, a stronger dollar now will eventually create a weaker dollar.

Key to making America great again will necessarily involve lower energy costs, alongside tariffs and tax cuts. This rationale forms the foundation of Goldfix's view that a weaker dollar is likely over the next four years. Whether the weakness comes sooner or later, there will be significant dollar depreciation as the U.S. re-engineers its economy to become an exporting nation.

Here is the conversation— a podcast recorded just two days ago—anticipating these types of events. Frankly, while we appreciate being correct on something, we did not expect Trump to start pressuring Powell so quickly. Enjoy.

Podcast Topics

Trump’s Three-Pronged Economic Plan

1. Raise Tariffs: Generate revenue and support domestic manufacturing.
2. Lower Taxes: Stimulate growth and increase disposable income.
3. Increase Spending: Invest heavily in rebuilding U.S. manufacturing and infrastructure.

Challenges to Implementation:

• The Republican majority may resist excessive deficit spending ahead of midterms.
• Democrats are likely to block tariff increases, creating political roadblocks.
• Even a unified mandate becomes a “lame duck” by midterms, limiting Trump’s ability to push his full agenda.

Market Implications

• Strong Dollar Expectations: Early market optimism assumed tariffs would strengthen the dollar. However:
• Shift to a Weak Dollar Policy:

Bessent’s Vision for Trump 2.0

• Economic Boom Goals: Bessent outlined a vision reminiscent of the 1920s Roaring Twenties, focused on growth and productivity. However:
• A weak dollar is crucial to this strategy, as it supports exports and offsets deficits from lower taxes and higher spending.
• Long-term productivity gains could stabilize inflation and strengthen the dollar by the end of Trump’s term.

• Key Risk: Rising long-term interest rates could undermine the plan.

The Weak Dollar Strategy: Why It Matters

• Export Competitiveness:
• Tariffs vs. Weak Dollar:

Free Posts To Your Mailbox