Afrasianet - Trump is approaching the economy, both in the United States and internationally, as an aggressive but short-sighted businessman and politician, not as an economist, a producer or a statesman, alarming the deep state and many elites in the collective West.
The prices of oil, gold, and the US dollar have fluctuated up and down, since the renewed US-Zionist aggression against Iran on February 28, in a way that has shaken the pillars of the global economy and the international financial system.
As soon as the war broke out, the US dollar swept a few percentage points against a basket of foreign currencies, as a "safe haven" where investors moved their assets, cementing its status as the dominant currency globally and regaining some of the value it had lost (about 10-12%) since Trump came to the White House.
The irony is that the news of the ceasefire, the frequent reports of the imminent agreement between Iran and the United States, and the emphasis here on the word "news", were returning the US dollar to its downward trajectory, and vice versa when clashes broke out in the Strait of Hormuz, hence the more fluctuation in its value than usual in recent weeks after the dollar's heart became related to the pulse of the security situation in the strait.
Trump's economic policies, including imposing tariffs without prior warning or consultation, his constant threats of trade wars, his open pressure on the Federal Reserve to reduce interest rates, and his fluctuation of economic positions and decisions according to real-time considerations, politically, media, or online, rather than long-term strategic planning, have created a state of chaos of expectations, and thus uncertainty among investors, about the future, the future of the dollar, and the future of the US economy.
This has led to lower investment rates in the United States, and in U.S. dollar-denominated financial assets, such as U.S. Treasury bills, compared to historical trends.
This, in turn, reduces the demand for the dollar internationally, and consequently its depreciation, as we have seen since Trump returned to the presidency in the White House at the beginning of last year.
This coincided with Trump's declared effort to weaken the US dollar, premeditated and deliberate, and hence his insistence, for example, on reducing interest rates, or not raising them, as part of his protectionist vision for the US economy.
A weaker dollar naturally makes imports more expensive for Americans, thereby reducing demand for them, and making American goods and services abroad relatively cheaper, thereby increasing their competitiveness.
This dual effect should reduce America's chronic trade deficit (and thus government deficit, according to the National Income Identification).
But the major dilemma facing Trump, and any US administration that tries to pursue such policies, including the weakening of the US dollar, is that it raises doubts about the solvency of the huge US public debt, i.e., the ability of the state to repay it with dollars that do not lose its purchasing power, and thus affect investors' desire to hold US government bonds and Treasury bills, which threatens the international financial system, not just the US one, with a terrible collapse, and with it the global dominance of the dollar.
Thus, Trump is dealing with the economy, both in the United States and internationally, as an aggressive but short-sighted businessman and politician, not as an economist, a production facility owner, or a statesman, which alarms the deep state and many elites in the collective West as a result of policies they see as indiscriminate and destabilizing of the entire ruling system, both economically and politically.
In contrast, stock market indices and earnings reached record highs under Trump, especially in the technology sector.
Trump's measures to ease government restrictions, including environmental, financial, and social restrictions on the business sector, and cut taxes (he had cut taxes on corporate profits from 35% to 21%), benefited large corporations more than the US economy, which grew by only 2% annually in the first quarter of this year, and 2.1% in 2025, compared to 2.8% in 2024 and 2.5% in 2023.
Despite Trump's braggadocio that he eliminated federal taxes on overtime and tips, which are supposed to benefit workers and employees, class polarization in American society, and the disparities between the super-rich and others, have reached their highest levels under Trump.
This has been accompanied by the annual inflation rate remaining above the Fed's 2% threshold (3.7% last month, 3.3% in March, compared to 2.4% in February and January, and 2.7% as the 2025 average), as Trump opposes raising interest rates to rein in inflation.
The turning point, of course, that has raised inflation rates in the United States in the last two months more than usual is the closure of the Strait of Hormuz, although the United States does not rely on it like others, but strategic commodities, such as oil, gas, and agricultural fertilizers, have international markets, and if their supply decreases, their price rises in all international markets, and therefore in the United States and elsewhere.
In addition, Trump's tariffs have raised the prices of consumer products for the average American, knowing that the United States is still the world's largest import market and has reached a record $4.3 trillion, or about 13.8% of GDP, not far from the historical average, although the sources and components of imports have been relatively different.
This means that citizens and families bear a greater burden of living as wages and salaries do not keep pace with prices, particularly in terms of house rents, energy carriers, transportation, food, health care, and university education.
If the Strait of Hormuz is closed, and the midterm elections are approaching next November, all of this will take away the political capital of Trump and the Republicans.
All of this raises questions about the nature of the relationship between the prices of oil, gold, and the dollar internationally, which is a network of intertwined dialectical relations, in which cause sometimes turns into a result, and the result becomes a cause, and it is also a network of relations in which these mutual effects may conflict or intersect, raising and decreasing this or that price, and its long-term effects may differ from its short-term effects.
Take, for example, the effect of the change in the price of the dollar on the price of oil (and gas and what is affected by their prices): the prevailing wisdom is that the price of the US dollar and the price of a barrel of oil is inverse: if the former rises, the second falls, because oil, to the extent that it is priced in dollars, its price decreases if the dollar rises against other currencies if it increases in popularity as a result of the Federal Reserve's raising interest rates, for example.
Now let's take the effect of the rise in the price of oil on the US dollar: if the causation comes from oil to the dollar, rather than the other way around, i.e., if something raises the price of oil (and its alternatives), such as a decrease in supply, for example as a result of the closure of the Strait of Hormuz, that alone reduces the amount of oil required, and that, while other factors remain constant, it is assumed that the demand for the dollar in which oil is priced will decrease, and thus the dollar will weaken.
First, the demand for oil is relatively inelastic, since benchmarks show that a 10 percent increase in the price of oil reduces the amount required by only 0.3 percent, meaning that a rise in the price of oil increases the seller's returns rather than decreases them, thus increasing the demand for the US dollar.
The central link here is the international pricing of oil in US dollars.
Second, the United States is an oil exporter, which increases the demand for the US dollar to buy it more, especially when other oil sources are less available as a result of the closure of Hormuz, for example, i.e., the oil supply becomes less elastic, i.e., less responsive to price changes.
Thirdly, this effect alleviates the US trade deficit, as a result of the increase in the price of one unit of exports versus one unit of imports, or the so-called terms of trade, which in turn raises the price of the currency of the exporting countries in international markets.
All of this pushes the dollar's rise in the face of structural factors that call for its decline in the long term, such as the superstitious public debt, trade balance deficits, and the public budget deficits.
However, the administration's Achilles heel here is that the rise in the price of energy carriers, and what is affected by them, raises the cost of living for citizens, and this is politically costly, as mentioned above, and the production costs of facilities, and this weakens the growth rate of US GDP, and thus the growth of jobs and incomes, even if it further weakens the economies of non-oil-producing countries.
To the extent that the rise in the price of oil and its substitutes, and oil is one of its production inputs, translates into a general rise in the price rate, i.e., an inflationary effect, only that, while other factors remain constant, weakens the dollar against other currencies, unless the overall inflationary impact of the rise in the prices of energy carriers is greater in the economies of other countries, especially if they are energy importers, in which case the dollar will strengthen.
But that would hit the strategy of weakening the dollar to improve the US trade balance, which would worsen as much as the dollar strengthened. Therefore, it can be said that Trump's repeated posts for weeks about the imminence of a deal with Iran are aimed at calming the oil and dollar markets.
Since these markets are heavily affected in the very short term by so-called "forecasts" in microeconomics, there is a constant need to inject a flood of these "forecasts" until they turn out to be false, so that a new flood of them arises, and a corresponding need arises to respond to them around the clock to keep the impact of the closure of the Strait of Hormuz in place.
Importantly, to the extent that the rise in the prices of commodities (oil, gas, copper, iron, steel, aluminum, wheat, corn, coffee, sugar, etc.) in the international markets leads to a general and continuous rise in the price rate, i.e., inflation, that alone, while other factors remain constant, increases the demand for gold.
However, to the extent that the US dollar remains the dominant international reserve currency, the first international reserve currency, loans, deposits, and exchange to date, despite its declining status compared to previous decades, which also price commodities, the dollar becomes a safe haven alternative to gold.
Gold, silver, platinum, palladium and rare metals are also priced in dollars in international markets and in futures contracts. Even when gold is priced in local currencies, it is based on its price against the dollar.
If a geopolitical crisis comes as an external factor to the functioning of the economic and financial system, the prices of everything will rise, and the comparisons will become relative rather than absolute: which prices will rise the most? For example, gold, or the dollar?
We note here that the price of an ounce of gold, after rising at the beginning of the war, fell from $5600 at the beginning of March to $4730 on 12/5/2026, after falling below $4200 after the end of March.
The price of gold has risen more than 60% during 2025. Gold is currently at an all-time high due to geopolitical tensions. But the dollar rose even more. That's all there is to it.
The decline of gold during the war itself, and before the ceasefire, after its initial rise, is linked to the rise of the dollar in the same period, because it is priced in dollars in the end, just like oil. Gold, as an asset, is a safe haven in periods of inflation, yes, but it does not generate a return, so if a need for cash arises, as happened after the rise in oil prices, gold is sold to finance other needs.
Also, gold does not yield the same return as the dollar, if it is placed in savings accounts, government bonds, or U.S. Treasury bills. Surprisingly, during the war, U.S. Treasury bills have increased. For example, the yield on ten-year Treasury bills has increased from 3.96% at the end of February to 4.26% in the first week of the war.
This is what made it more attractive than gold. This was accompanied by market expectations that the Federal Reserve will not cut interest rates due to the inflationary impact of the rise in oil prices and its siblings.
For more, please see the article "The Triple Price of Gold, Oil and Dollar". But what needs to be monitored now is: the US inflation rate, the US interest rate, and the price of oil as one of the determinants of the inflation rate.
The higher the inflation rate while interest rates remain steady, the higher gold tendency.
The lower the inflation rate, the more pressure on the Federal Reserve to lower the interest rate, and gold tends to rise, and if it delays its cut, gold tends to fall.
If the interest rate remains as it is now, at 3.75%, and inflation reaches its level, as it reached or exceeded 3.7% in April, gold tends to rise, and the dollar to fall. If the US administration manages to control inflation, while other factors remain stable, or manages to reduce it, gold will fall down. The lesson remains the Strait of Hormuz.
