Gold and Bitcoin Set to Perform Well After Trump's Victory

With Donald Trump now having won the U.S. presidency, both gold and bitcoin are expected to perform well, according to JPMorgan analysts, who highlight the "debasement trade."

The debasement trade refers to an investment strategy that benefits from the devaluation or weakening of a currency, typically due to inflationary or expansionary fiscal policies. In this trade, investors buy assets like gold and bitcoin, seen as stores of value that can maintain their worth as a currency's purchasing power decreases.

JPMorgan analysts, led by managing director Nikolaos Panigirtzoglou, stated, "The debasement trade is likely to be reinforced by both tariffs and geopolitical tensions as well as an expansionary fiscal policy ('debt debasement')." They also noted, "We do not see the initial negative market reaction by gold as a rejection of the 'debasement trade' under a Trump win. After all, bitcoin, the other component of the 'debasement trade' rallied after the Trump win."

The price of bitcoin surged to an all-time high of $76,244 on Nov. 6, the day election results confirmed Trump's victory. As of now, the cryptocurrency is trading at approximately $75,100.

When asked about a 2025 price target for bitcoin, Panigirtzoglou expressed positivity but did not provide a specific target.

Outlook on Gold and Bitcoin Prices

The pace of central bank gold purchases will be crucial in determining gold's price trajectory through 2025. JPMorgan analysts noted that central banks had significantly increased gold holdings following the Ukraine war and the sanctions imposed on Russia. They expect ongoing tariffs and geopolitical tensions to drive further diversification by central banks, including the People's Bank of China, away from dollar reserves and into gold.

Retail investors have also been increasingly backing both gold and bitcoin, with notable investments in gold and bitcoin ETFs since last summer. This trend is expected to continue into 2025, supported by Trump's policies.

Bitcoin may also receive a boost from MicroStrategy, which has announced an aggressive bitcoin acquisition program through its "21/21 plan." This plan aims to raise $42 billion in capital over the next three years, split evenly between equity and fixed-income securities. For 2025 alone, MicroStrategy plans to invest $10 billion into bitcoin, approximately equal to its cumulative purchases since mid-2020.