Trump Policies Positive For Gold – Mitsubishi

Release Date: 
Friday, May 12, 2017

Gold prices rose on Friday as nervous investors moved towards safe haven assets such as gold.

"Gold prices moved higher on Friday, as recent political events in the U.S. continued to weigh on the greenback and boost demand for safe-haven assets, although investors were also eyeing the release of U.S. data due later in the day… Markets were still jittery since U.S. President Donald Trump's unexpected decision to fire FBI Director James Comey. Comey had been leading his agency's investigation into alleged Russian meddling in the 2016 U.S. presidential campaign and possible collusion with Trump's campaign. Investors were concerned the latest events in Washington could hamper the U.S. administration's ability to implement promised tax reform and stimulus measures…." ("Gold prices move higher amid U.S. political turmoil," Investing.com, 5/12/17.)

Gold ended the week down $0.20, closing at $1,228.70. Silver prices closed at $16.54, up $0.13.

Trump Policies Positive For Gold – Mitsubishi
Dr Jonathan Butler, Precious Metals Strategist at the Mitsubishi Corporation, wrote an article explaining why President Trump's policies may lead to higher gold prices.

"What therefore will Trumponomics mean in future and what are its implications for gold?… Promises of $1 trillion of additional spending on the military and infrastructure implies higher demand for everything from oil to construction materials, and also offers to create more jobs at a time when the US unemployment rate is at the lowest in a decade, at 4.5%. This is of course potentially inflationary and should be supportive of gold over the longer term as a traditional inflation hedge…

"[D]iscussions over the US budget deficit still loom large at the time of writing and may yet spill over, intentionally or not, into a failure of confidence in the US to repay its debts or even an outright default. The nearest parallel for this is the debt ceiling negotiations of 2011, when bitter political disputes forced the US to the brink of sovereign default and caused credit rating agencies to downgrade US debt for the first time in history. The increase in gold to all-time nominal highs of $1,921 in August-September 2011 offers a glimpse of what could happen to gold in the event of a return to this sort of political and economic impasse…

"After the dollar and stock market euphoria of late 2016 and early 2017, there are already signs that the Trump reflation trade may be more an expression of hopeful sentiment rather than a new paradigm of actual higher economic growth and inflation. Treasury yields, the dollar, equity valuations and inflation expectations are all reversing their previous gains, to the benefit of gold. Though it remains too early to say with any certainty, bullion may even end up benefitting further from the Trump administration's changes to the regulatory environment and the promotion of US manufacturing. As Trumponomics, in whatever form it ultimately takes, brings a new set of political, economic and trade uncertainties over the coming four years, gold should have plenty of opportunities to shine as a safe-haven asset and portfolio diversifier." ("Gold vs Trumponomics," Alchemist Issue Eighty-Five, 5/17.)

Gold Offers Value To Investors Throughout The World - Groh
Tocqueville's portfolio manager Doug Groh told Kitco News why gold prices are supported by the current economic and political climate.

"'You see gold perform well when everyone is anxious - either about the dollar or interest rates, or perhaps geopolitical events. And it looks like the overarching theme this year has been geopolitical events, such as in Europe and Korean Peninsula. Investors are looking for that safe haven and gold provides that,' Groh said.

"And even though traders are seeing opportunities elsewhere at the moment due to a risk-on environment, once inflation starts to come in and the U.S. dollar loses value, investors will flock back to the safe-haven metal, the gold expert explained… 'One recognizes that there is insufficient growth from that credit stimulation to cover that debt over time. And, as a result, you are going to have to diminish the currency that debt is paid in, and gold would be a good offset to that diminishment of value, i.e. inflation. Investors are recognizing that the plans Trump is putting out there are just not realistic…'

"Gold is a very unique investment, Groh added, as every culture has a different view of the precious metal. 'Some look at it in terms of store value, some look at it as an offset to their currency, or as a hedge to inflation or monetary policy. That is the beauty of gold - it offers so much to investor around the world….'" ("Gold Is A Measure Of Anxiety, Has Good Foundation At $1,200 - Tocqueville," Kitco, 5/10/17.)

Gold To $1400 By Fourth Quarter - Credit Suisse
Swiss banking giant Credit Suisse affirmed its forecast that gold prices may rise to $1400 by the end of 2017.

"Credit Suisse has reiterated its mid-April outlook calling for gold prices to appreciate to $1,400 an ounce by the fourth quarter. The bank cited expectations for U.S. real interest rates to surprise to the downside, waning strength in the U.S. dollar, a dovish central-bank approach to future monetary policy, continued robust Chinese investment demand, an elevated probability of a disruptive geopolitical event, and positioning in gold that remains neutral and well below levels seen in 2016…." ("Gold likely to appreciate to $1,400 an ounce by end of 2017," Scraperegister, 5/8/17.)

Gold Fundamentals Intact – TheStreet
A commentary from the TheStreet set forth the reasons why the gold bull market remains intact and provides a buying opportunity for investors.

"Now is the time to take advantage of gold's dip and buy… The fundamentals supporting the case for a continued bull market in gold have not changed. Like any bull market there will be peaks and valleys.

"Gold is the one financial asset that carries with it no counterparty risk. The value of your gold does not rely on any other party's ability to pay. This is key, as the financial system is burdened with massive, excessive debt loads that we have never before witnessed … Other economic zones such as Europe and China suffer under similar burdens. Gold is the antithesis of debt. It is money, unencumbered and tangible, its value clear…

"Gold also performs very well in times of geopolitical uncertainty, which is clearly the case now and for the foreseeable future. Conflict and tensions always exist in the world but lately those tensions have become more profound… Concentrate on the on gold's favorable fundamentals. The story has not changed. Markets move up and down but trends remain intact for long periods of time. As any investor will tell you, buy low and sell high. We view this current dip in the gold price as an opportunity to buy low. No fear!" ("Why the Gold Bull Market Will Continue," TheStreet, 5/11/17.)

Financial Markets Heading Towards "Bloodbath" – Stockman
President Reagan’s former director of the Office of Management and Budget, David Stockman, sees an imminent "bloodbath" for the global economy.

"The whole thing is headed for a real fiscal bloodbath sometime this summer or fall when they run out of debt ceiling (money) and can't borrow any more to pay for all of this. When they use up the cash on the balance sheet right now… we're going to be in a huge shutdown mode… There will be panic in the financial markets. This is not priced in. The market isn't expecting anything. I think it will cause some very difficult times…  

"This isn't speculation, this is what is coming down the pipe. I don't think it is even remotely anticipated by the markets. It is not priced in at all. That's when you get huge disruptions in the financial markets. When they're hit by surprise or black swans, that's where we're heading in a matter of few months…

"The gold market is relatively small in comparison to the size of the equity market or bond markets. The gold markets are only a fraction of that. When the panic comes… the price of gold will rise dramatically." ("Stockman On The Coming Fiscal Bloodbath: "Sell Stocks, Sell Bonds, Buy Gold," ZeroHedge, 5/9/17.)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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