Trump dispatches more National Guard soldiers to Los Angeles, constitutional crisis and safe-haven demand in gold market heat up

1. The situation in Los Angeles escalates

On June 9, local time, US President Trump announced that he would send an additional 2,000 National Guard soldiers to Los Angeles to deal with the ongoing riots caused by conflicts over immigration enforcement. This deployment is a further intervention by the Trump administration in the situation in California after the first dispatch of 2,000 National Guard troops on the 7th. As of June 10, 1,700 National Guard soldiers and 700 Marines have been deployed in the greater Los Angeles area, focusing on protecting federal agencies and personnel.

Escalation of conflict and constitutional dispute: The incident originated from a large-scale illegal immigrant raid by the U.S. Immigration and Customs Enforcement (ICE) in Los Angeles on June 6, which resulted in 44 arrests and triggered violent street clashes. Protesters clashed with law enforcement officers, throwing rocks and water bottles, while police used tear gas and rubber bullets to disperse the crowd. Trump bypassed California Governor Newsom and directly mobilized the National Guard, triggering a constitutional crisis. California Attorney General Rob Bonta has filed a lawsuit, accusing the Trump administration of "illegal overreach" and asking the court to revoke the deployment order.

Political game and social division: The Trump administration was accused of "creating chaos to divert political pressure". California Governor Newsom pointed out that only 300 of the first 2,000 National Guardsmen actually participated in the operation, and the rest were idle in the federal building, which was purely a "political show". Los Angeles Mayor Bass stressed that federal intervention has exacerbated community fears, while local police have the ability to control the situation. This conflict exposed the deep conflict between the federal government and the state on immigration policy, as well as social rifts such as racial confrontation and economic anxiety.

The above picture shows the statement of the Northern Command

2. Gold’s short-term risks increase

Safe-haven demand boosts gold prices in the short term: The escalation of violent clashes in Los Angeles and the constitutional crisis have boosted demand for gold as a safe-haven asset. In the Asian session on June 10, spot gold continued to fluctuate at a high level, and London gold suddenly rose by about $20 to around 3,330 at noon. Geopolitical risk premium has become a supporting factor for gold prices, and the market is worried that the incident may spread to other cities and cause national unrest.

The dual effect of the US dollar trend and the Fed's policy: Although the US dollar index rebounded to 99.2058 in the Asian session on June 10, the market still expects the Fed to cut interest rates. Fed Governor Waller previously said that if core inflation continues to move towards the 2% target, interest rates may be cut later this year, and the long-term low interest rate environment is good for gold. However, in the short term, the strengthening of the US dollar still suppresses gold prices, and it is necessary to pay attention to the policy signals of the FOMC meeting on June 17-18.

Potential impact of China-US trade negotiations: The first meeting of the China-US economic and trade consultation mechanism currently being held in London has become another key variable. If the negotiations make progress, it may ease market concerns about tariff escalation and reduce the inflation hedging demand for gold; on the contrary, if the negotiations fail, geopolitical risks and trade frictions will further push up gold prices.

Although the June meeting of the Federal Reserve in Los Angeles may send hawkish signals, coupled with the fiscal expansion policy of the Trump administration, if inflation pressure exceeds expectations, it may change the long-term logic of gold's rise. Investors need to be wary of liquidity shocks caused by sudden news, and it is recommended to control positions and set stop losses.