Trump Supporters Need Safe Haven Assets As President Fights “Deep State” Bureaucrats

Release Date: 
Friday, February 24, 2017

Gold prices hit a fourteen-week high to trade above a key technical level of $1,250 as expectations for quick enactment of President Trump’s economic policies faded.

“Gold hit its highest in 3-1/2 months on Friday as the dollar hit a one week low after the new US finance chief poured cold water on the ‘Trumpflation trade’ that had boosted the greenback this year.

“Treasury Secretary Steven Mnuchin said on Thursday that any steps US President Donald Trump's administration takes on policy would probably have only limited impact this year, though he wants to see tax reform passed by August. The comments suggested much work was still needed on the sweeping tax plan that Mnuchin called his main priority, and which investors had bet would stoke growth and inflation this year.

“’We've got a vacuum of (US domestic) policy, real (interest) rates going down, the dollar going sideways and geopolitical (jitters) around the world ... all helping gold,’ ICBC Standard Bank analyst Tom Kendall said. ‘There is apparently a move of institutional investor money into gold and there are usually very good reasons for that….’” (“Gold hits 14-week high as 'Trumpflation trade' fades,” Business Standard, 2/24/17.)

Gold ended the week up $24.00, closing at $1,257.90. Silver prices closed at $18.43, up $0.38.

Trump Supporters Need Safe Haven Assets As President Fights “Deep State” Bureaucrats
A commentary in the commodity news website Commoditytrademantra.com warns that President Trump will face significant opposition by the “Deep State” bureaucrats in Washington.

“Notwithstanding the strong demand for gold and silver globally, buying activity in the U.S. retail market for physical bullion has fallen noticeably in the wake of Donald Trump’s election victory. And retail selling in the U.S. has increased. The bullion markets have entered a new phase… Today, the reasons to diversify into gold and silver are as strong as ever, but they’re perhaps less obvious to the average retail buyer in the U.S…

“Even the most optimistic Trump supporters should be planning for a bumpy ride on the way to reform. For starters, it is increasingly clear the president is at war with the Deep State – the unelected, often anonymous bureaucrats and elites who have been running our government from behind the scenes for decades.

“This battle breeds uncertainty and the potential for real turmoil. It is impossible to confidently predict what the political landscape will look like just a few months from now, let alone a few years down the road. The potential for widespread social unrest should not be discounted. Anti-Trump forces are already mobilized and cultivating enough hysteria to foment violence in places like Berkeley. His supporters, by and large, seek to avoid physical confrontation. But that could change quickly if Trump’s war with the Deep State takes a turn for the worse. The president has many enemies in Congress, including some powerful Republicans…

“Turn away from America’s extraordinarily volatile political scene, and you’ll find other reasons to retain some caution. This year promises to be pivotal in Europe. Anti-EU candidates just may win in upcoming European elections. Should that happen in either France or Germany, it is likely to shake markets to the core.

“Europe isn’t the only continent with trouble brewing. Jim Rickards is among a number of experts who think the next economic crisis might kick off in Asia. Appearing on the Money Metals podcast last week, Rickards makes the case for China “going broke” as officials attempt to maintain a currency peg and grapple with the massive numbers of bad loans piled up in Chinese banks….” (“Gold and Silver Markets have Entered a New Phase,” Commoditytrademantra.com, 2/23/17.)

“Commodities King” Gartman Bullish On Gold – CNBC
“Commodities King” and financial analyst Dennis Gartman told CNBC that he is bullish on gold as prices pass a key technical level.

“I think the momentum [for higher gold prices] can last quite a long time... I think something is going on in the gold market that doesn’t seem to be getting a great deal of attention... the merchants… are short but they are so marginally short and I think that is supportive of the gold market… and the fact that the monetary policies in Europe and Japan are remaining expansionary; they continue to experiment with quantitative easing… that’s going to make its way into the gold market.

“I’m bullish on gold it’s been trending better it’s been trending better in non dollar terms than in dollar terms but even in dollar terms it’s strong. If we can trade above $1250 and I think we shall do that either this afternoon or tomorrow, that turns a lot of technical systems much stronger and the fundamentals warrant higher prices….” (Dennis Gartman on gold’s next move,” CNBC, 2/24/17.)

Inflation, Chinese And Indian Economies All Positive For Gold – Holmes
The CEO of U.S. Global Investors and Forbes Contributor, Frank Holmes, wrote that inflation continues to rise in the U.S. That fact, coupled with the growing wealth of gold-loving China and India, should send gold prices higher.

“Inflation just got another jolt, rising as much as 2.5 percent year-over-year in January, the highest such rate since March 2012. Led by higher gasoline, rent and health care costs, consumer prices have now advanced for the sixth straight month. In addition, January is the second straight month for rates to be above the Federal Reserve’s target of 2 percent…

“A March rate hike now looks all but imminent. Many economists—including the Goldman Sachs economists I had the pleasure to hear speak this week—expect to see at least three such hikes this year alone… Gold responded accordingly, closing above $1,240 for the first time since soon after the November election…

“The question I have is: Why would an investor deliberately choose to lose money? But that’s precisely what’s happening now with inflation where it is… These were among some of the topics addressed by former Fed Chair Alan Greenspan… ‘Significant increases in inflation will ultimately increase the price of gold,’ Greenspan said. ‘Investment in gold now is insurance. It’s not for short-term gain, but for long-term protection.’ He also reiterated his view, which I share, that gold is much more than just a metal but a currency…

“According to PwC’s models, China and India should become the world’s number one and number two largest economies by 2050 based on purchasing power parity (PPP). China, of course, is already the largest economy by that measure, but PwC sees the Asian giant surpassing the U.S. economy on an absolute basis by as early as 2030…

“Then there’s Morgan Stanley’s 118-page report, “Why we are bullish on China.” The investment bank sees a number of dramatic changes over the coming years, the most significant being China’s transition from a middle-income nation to a prosperous, high-income nation sometime between 2024 and 2027… Taken together, this is all good news for gold. Again, when incomes rise in China and India, gold demand has historically benefited…. (“Gold Gets A Shot In The Arm From Inflation And China,” Forbes, 2/21/17.)

Major Reinsurer Owns Gold To Guard Against Inflation
Hedge fund manager and chairman of the reinsurer Greenlight Capital RE has included gold in the reinsurer’s portfolio to protect against rising inflation.

“Hedge fund manager David Einhorn is betting on declines in government debt and a rebound in gold to guard against the risk of inflation under President Donald Trump. ‘We made several changes to the macro portfolio in response to the election,’ Einhorn said Thursday in a conference call discussing results for Greenlight Capital Re Ltd., the Cayman Islands-based reinsurer where he is chairman…

“Einhorn is seeking to extend a rally in the investment portfolio of Greenlight Re, which said late Wednesday that it posted back-to-back quarterly profit for the first time since 2013 … Still, ‘our long-term outlook remains bullish,’ for the metal, Einhorn said. ‘The new administration comes with a high degree of uncertainty, and its policy initiatives appear to be focused on stimulating growth and, with it, inflation….’” (“Einhorn Shorts Sovereigns, Affirms Gold on Trump Uncertainty,” Bloomberg, 2/23/17.)

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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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