Gold price and the Swiss franc are soaring this year, while the US Dollar Index is plunging as investors embrace their role as safe haven assets amid soaring risks. The USD/CHF exchange rate plunged to 0.7964, down from 13.50% from the year-to-date high, while gold price has jumped to $3,865. Gold has jumped by almost 50% from the year-to-date low.
Gold and Swiss franc have become safe-haven assets
The main reason why the Swiss franc and the gold price have soared this year is because of the ongoing safe-haven demand because of Donald Trump’s policies.
The first main risk that pushed these assets higher was Trump’s tariff policies, which have affected all countries. His plan has placed a minimum tariff rate of 10%, with countries like India and Brazil receiving a 50% levy on most of their items.
The other main risk has been on the Federal Reserve, whose independence has been affected by some Trump policies. Trump considered firing Jay Powell earlier this year after the Federal Open Market Committee (FOMC) rejected his calls for a large interest rate cut.
While he has not fired Powell, he has attempted to fire Lisa Cook, accusing her of mortgage fraud. Just this week, the Federal Reserve allowed her to serve at the central bank as her case goes on in lower courts.
Firing Fed officials would be risky for the US economy as has happened with the Turkish lira, which has plunged to a record low because of the lack of central bank independence.
The two safe-haven assets also reacted to Trump’s flagship Big Beautiful Bill, which he signed into law a few months ago. This policy will add trillions into the US deficit in the coming years. However, on the positive side, the impact will be offset by Trump’s tariffs, which will bring in over $4 trillion in the next decade.
Federal Reserve interest rate cuts
Gold price and the Swiss franc have jumped as investors reacted to the recent Federal Reserve interest rate cut and the rising odds of more in the future.
The bank decided to slash interest rates by 0.25% and hinted of more to come, citing the weak jobs numbers.
Odds of more Fed cuts rose on Wednesday after the US government shutdown happened and after ADP published weak non-farm payrolls data.
The government shutdown happened as Democrats and Republicans disagreed on how to fund the government. Democrats are using their leverage to demand healthcare spending, while Republicans want a clean spending package.
A report by ADP on Thursday showed that the economy lost 36,000 jobs in September, lower than the expected increase of 50,000.
Therefore, the weak job numbers and the government shutdown mean that the Federal Reserve will cut interest rates this month.
More rate cuts will happen in 2026 when Trump replaces Jerome Powell when his term ends.
As such, there are rising odds that the gold price and the Swiss franc will keep soaring this year. In a note on Thursday, Goldman Sachs said that gold has more upside, citing the ongoing robust inflows in gold ETFs.
Goldman also noted that central banks were boosting their gold holdings this year. Indeed, data show that global central banks now hold more gold than the US dollar in their reserves, a trend that will accelerate in the coming years.
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