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Donald Trump – Bad For US Dollar, Good For Gold?

Commodities / Gold and Silver 2016 Mar 03, 2016 - 12:40 PM GMT

By: GoldCore

Commodities

Donald Trump’s emergence as the Republican frontrunner and possible future U.S. President is causing some gold and investment analysts to suggest diversifying into gold according to the Wall Street Journal.



Donald Trump – Gage Skidmore via Commons.wikimedia.org

From the WSJ:

The other winner from Super Tuesday could be gold.

With Donald Trump solidifying his status as the front runner in the Republican field, some investors and analysts watching from overseas say that the ascendancy of the brash New York businessman could rattle global markets as the November presidential election inches closer. Nervous investors, they say, could pile in to gold and other safe-haven assets as an insurance policy.

The journal quotes David Govett of London-based commodities broker Marex Spectron:

“The mere thought would suggest a good opportunity to buy gold,” said Mr. Govett, who heads the firm’s precious-metals trading desk.

“Who knows what could happen should he be handed the keys to the White House,” said Mr. Govett.”

James Sutton, a London-based portfolio manager on the global natural resources equities team at J.P. Morgan Asset Management concurs:

“If there’s any uncertainty regarding the U.S. election and the potential for a slightly off-center candidate, whether that be Sanders or Trump winning the election, then I can see a scenario where that’s bad for the dollar.”

It is important to note that gold’s fundamentals are very sound and the possible “Trump gold factor,” if there is one, is only one of a myriad of fundamentals that are driving the gold market.

As Mining.com comprehensively notes

Following three down years, many factors have been driving gold’s resurgence in 2016:

- Geopolitical turmoil – spreading from the Middle-East into Europe and beyond – burnishing gold’s safe haven status

- Doubts about the health of the global economy and financial system and the longer-term impact of the slump in oil prices forcing investors to look for insurance policies

- Uncertainty surrounding the future of the European Union and the possible fallout from a Brexit

- Slumping stock markets around the world pushing investors into alternative assets particularly gold

- Physical gold investors jumping back into ETFs – more than wiping out all of last year’s outflows less than two months into the new year

- Skepticism about further rate hikes in the US and negative interest rate policies in a growing number of developed economies around the world lowering the opportunity costs of holding gold

- Continued central bank buying and a belief that the strengthening trend in the US dollar is over for now

- First indications that inflation may be creeping back into the financial system making gold attractive as a hedge

- A realization that gold around $1,000 an ounce represents an historical bargain buying opportunity

Uncertainty regarding the U.S. presidential election will likely aid gold. But gold’s outlook is bright whether Donald Trump, Hillary Clinton or the Messiah himself or herself becomes President.

Gold’s fundamentals are positive given the very high degree of macroeconomic, monetary, geopolitical and systemic risk in the U.S. and indeed the world today.

LBMA Gold Prices
03 Mar: USD 1,241.95, EUR 1,141.48 and GBP 882.24 per ounce
02 Mar: USD 1,229.35, EUR 1,131.53 and GBP 881.54 per ounce
01 Mar: USD 1,240.00, EUR 1,141.70 and GBP 886.09 per ounce
29 Feb: USD 1,234.15, EUR 1,131.46 and GBP 890.95 per ounce
26 Feb: USD 1,231.00, EUR 1117.58 and GBP 878.87 per ounce

This update can be found on the GoldCore blog here.

Mark O'Byrne

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