Gold and Bitcoin Outlook Post-Trump Election

According to JPMorgan strategists, gold and bitcoin are expected to benefit from Donald Trump’s second presidency. Despite an initial negative reaction to the US election results, these assets are anticipated to thrive due to the "debasement trade." This strategy will likely be enhanced by tariffs, geopolitical tensions, and an expansionary fiscal policy.

Market Reaction
Strategists, led by Nikolaos Panigirtzoglou, argue that the initial market dip for gold doesn’t reflect a rejection of the debasement trade post-Trump victory. Instead, it is viewed as a continuation of recent profit-taking, as illustrated by bitcoin's rally following the election.

Profit-Taking and Central Bank Activity
After a solid three-month rally from August to October, gold has experienced significant profit-taking recently. JPMorgan indicates that increased central bank activity will drive gold prices towards 2025, with central banks increasing their gold reserves after the Ukraine war and sanctions on Russia. While China paused its gold purchases in April, JPMorgan predicts that geopolitical issues will drive further diversification by central banks away from the US dollar and into gold.

Retail Investor Support
Support from retail investors is expected to persist, as shown by increased purchases of bitcoin and gold ETFs since last summer. Strategists believe this trend will continue into 2025, with retail investment patterns in October indicating an inclination towards the debasement trade. The uptrend in gold ETF and spot bitcoin ETF flows is anticipated to spill over into the next year.

MicroStrategy's Role
Additionally, MicroStrategy's aggressive acquisition program, known as the "21/21 plan," is expected to bolster bitcoin's prospects alongside Trump's policies. MicroStrategy, the largest public corporate holder of Bitcoin, plans to invest $42 billion over the next three years, including a $10 billion investment for 2025.