What Trump’s First 100 Days Portend for Precious Metals Investors

By Stefan Gleason*


The first 100 days of the Trump administration have brought some surprises and disappointments – as well as some new threats and new opportunities for precious metals investors.

Among the disappointments was President Trump’s inability to push Obamacare repeal through Congress. The White House intended for the GOP’s replacement to reduce the deficit and lay the groundwork for tax cuts.

Now there is a very real chance that no tax reforms whatsoever will be passed this year. And that would be an even bigger disappointment to many investors. Ideological divisions within the GOP may well lead to debt ceiling brinksmanship and a possible government shutdown.

Trump’s surprise about-face on foreign policy in ordering bombings in Syria could have far-reaching implications for U.S. relations with other problem regimes including Iran, Russia, China, and North Korea. The geopolitical risks going forward are many and range from a new Cold War, to trade and currency wars, to the worst-case scenarios of a North Korean attack on Hawaii or an all-out nuclear war.

The debate over what to do about Assad’s regime in Syria is a sideshow compared to the looming conflict with China. Unlike Syria, China is a major world power that has the ability to hurt the U.S. economically and undermine its geostrategic position in the world.

The Chinese economy is drowning in debt that is tied to overvalued real estate and overbuilt infrastructure (including its infamous “ghost cities”). The only way to avert a crash may be for Chinese authorities to devalue their currency.

That’s exactly what Jim Rickards, author of Currency Wars and The Death of Money, thinks will happen. He expects the Chinese yuan to be devalued. That, in turn, could trigger turmoil in U.S. financial markets and an angry response from the Trump administration.

Gold and Silver Shine Despite Fed Rate Hikes

During times of rising geopolitical uncertainty, precious metals tend to benefit from safe-haven inflows. So far in 2017, gold and silver have been off the radar of most investors as global equity markets have remained stubbornly elevated – seemingly impervious to any bad economic news or troubling developments in international relations.

Gold (and silver) have performed well
so far during Trump’s presidency.

Maybe investors are willing to give President Trump an extended honeymoon period. But at some point, optimism toward the Trump economy will crack if he and the GOP Congress can’t find a way to deliver on their core promises to voters.

At some point, tensions with foreign adversaries could escalate and blow back on markets.

At some point, the Federal Reserve could raise rates one too many times and trigger a stock market meltdown.

Of course, there is no guarantee that any of the extant threats to financial markets will redound to the benefit of precious metals markets. As long as the Fed remains committed to raising rates, the U.S. dollar stands to gain against foreign currencies – at least in theory.

So far in 2017, the Greenback has drifted slightly lower despite hawkish gestures from the Fed. Gold and silver, meanwhile, have performed well so far during Trump’s presidency. In April, gold prices broke out above a resistance level near $1,260/oz.

A Contrarian Perspective

Markets don’t always move in response to events – and when they do, sometimes it’s in the opposite direction of popular expectations. Case in point: Trump’s election win was supposed to be bad for the stock market. It turned out to be great for the stock market.

The Fed was supposed to be bullish for the dollar and bearish for precious metals this year. So far, that popular expectation has been proven wrong.

If you try to trade in and out of gold and silver positions based on what’s in the news, you’ll get constantly whipsawed. Sometimes events in the world that ought to be bullish for gold end up having no effect or a negative effect on prices. And sometimes seemingly bearish headlines kick off rallies rather than price drops.

As we’ve advised before, investors should expect the unexpected. We live in an unpredictable world and are governed by an unpredictable White House. The best way to make sure you’re never caught off guard is to always hold a core position in physical precious metals.

BLANCHARD: Gold prices skyrocket on geopolitical uncertainties.  More gains to come?

Gold prices have skyrocketed to a five-month high above $1,270 in the wake of geopolitical uncertainty in the Middle East and after the Labor Department issued a lower-than-anticipated jobs report in March, and analysts at Blanchard and Company say they expect more gains for precious metals on the horizon.

“Gold’s price action following the missile attack on Syria was a traditional flight-to-safety move, and the jobs report only accentuated some of the weakness in the economy that has been overshadowed by post-election equities enthusiasm,” said Blanchard and Company President & CEO David Beahm. “With uncertainty around President’s Trumps policy toward Syria going forward, gold should benefit from safe-haven buying.”

Beahm said safe-haven buying and ideas that the weak jobs report could delay or slow future Fed interest rate hikes propelled the price of gold to a five month high, and rising geopolitical uncertainty and concerns about cracks in the economic picture have created fresh investor appetite for gold. Increasing tensions with North Korea and upcoming French elections are also boosting gold demand.

A potential conflict with Russia in the Syrian matter is another factor that could impact the price of gold to the upside, Beahm added. On Friday, Russian President Vladimir Putin called the missile strike against Syria “an act of aggression against a sovereign state delivered in violation of international law under a far-fetched pretext.” Russia also initiated an emergency meeting of the United Nations Security Council to discuss the incident, and on Friday afternoon it was reported that Russian warships were steaming toward the U.S. Navy warships that launched the Syrian attack.

“Last July, gold prices traded as high as the $1,390 an ounce, and precious metals traders are monitoring the $1,265 an ounce level closely,” Beahm said. “Sustained strength above that zone could be the signal for another strong rally wave in gold with the $1,300 level as the next bullish chart objective. Blanchard wouldn’t be surprised if we see this level in the near term with so much geopolitical uncertainty and no clear U.S. policy being articulated.”


Correction and Update: Writing for US Gold Bureau

Corrected link to US Gold Bureau below.  Apparently the one I published originally won’t work.

Just to let readers know that I will be writing occasional original articles for Austin, TX based US Gold Bureau.  The articles, by agreement with US Gold Bureau, will not appear here.  The US Gold Bureau website https://invest.usgoldbureau.com is blocked from being viewed by computer users who do not have North American IP addresses as US Gold Bureau only provides its services in North America so isn’t interested in accesses from elsewhere.  However,  because lawrieongold has strong North American readership it may be worthwhile for my North American readers to log on to the US Gold Bureau site.  There is a work-around for those without North American IP addresses, if interested, through setting up and utilizing the Tor Browser which can be configured to make it appear you have an IP address anywhere in the world.

My first article on the US Gold Bureau site, is titled: What the FBI Investigation Into the Trump Campaign Could Mean for Gold.  If you have a North American IP address you should be able to read it by clicking on the link.

A second article looking at the importance of Swiss gold imports and exports and their significance in terms of global gold flows is also up on the site:  Switzerland is Key to Global Gold.  Again you’ll need an american IP address  – or a work-around – to access it.

Trump’s Obamacare repeal fail could spell doom for other initiatives – Blanchard

Here’s comment from theCEO of one of the USA’s biggest gold dealers suggesting that President Trump’s failure to push his health care changes through Congress could suggest he may also have difficulties in persuading Congress to agree some of his other proposed key reforms – notably on taxation and infrastructure.  The end result could be strong growth in the precious metals markets he avers.

After a post-election equities march to record highs dubbed by some as “the Trump rally,” the new president’s failure to deliver on Obamacare repeal and replacement may spell similar doom for his tax reform initiative, says the CEO of Blanchard & Co, which claims to be America’s largest precious metals investment firm, and gold is poised for significant gains if that happens.

“President Trump’s tax reform plan has been largely predicated on the savings the federal government would have seen had Congress been able to repeal and replace Obamacare,” says Blanchard and Company President and CEO David Beahm. “The stock market rally above 21,000 was largely driven by Wall Street’s expectation that corporate tax cuts were a given, but I think those prospects are looking much less certain today.”

As the equities markets begin to shed some of the gains they’ve seen since Trump’s election victory, and as political analysts begin to advance the comparison between Watergate in the early 1970s and the FBI’s ongoing investigation into the ties between associates with the Trump campaign and Russian hacking into the U.S. election, a new geopolitical uncertainty begins to take shape that will impact the markets even more.

“Two of the big historic drivers for the price of gold have been risk and global geopolitical uncertainty, and over the last 25 years dating to the first Gulf War, the Middle East has been the hotbed for a lot of that uncertainty,” Beahm said. “Now that we have a sitting President in the middle of a growing FBI investigation placing the world’s top superpower into a potential storm of geopolitical uncertainty, this could certainly unhinge equities markets and drive gold much higher.”

Until there’s some clarity that an investigation into the president and his team has concluded and found no wrong doing, the markets are likely to be volatile and risky. But gold should see increased investor demand to hedge stock risk, and the precious metals complex could see strong growth as a result, Beahm said.

Investors Shift Back into Gold as Trump’s Honeymoon Period Ends

By Frank Holmes – CEO and Chief Investment Officer US Global Investors

Investors Shift Back into Gold as Trump’s Honeymoon Period Ends

That didn’t take long.

After little more than two weeks, President Donald Trump’s honeymoon with Wall Street appears to have been put on hold—for the moment, at least—with major indices making only tepid moves since his January 20 inauguration. That includes the small-cap Russell 2000 Index, which surged in the days following Election Day on hopes that Trump’s pledge to roll back regulations and lower corporate taxes would benefit domestic small businesses the most.

Is Trump's Honeymoon with Wall Street Over Already?
click to enlarge

And therein lies part of the problem. Although the President managed to sign an executive order last week requiring the elimination of two federal regulations for every new rule that’s adopted (and ordered a review of Dodd-Frank and former President Obama’s fiduciary rule), other campaign promises that initially excited investors—tax reform and an infrastructure spending deal among them—might have already hit a roadblock.

According to Reuters, a three-day meeting in Philadelphia between President Trump and congressional Republicans ended in a stalemate, with it looking less and less likely that tax reform will happen during Trump’s first 100 days in office—perhaps even the first 200 days. As for infrastructure, several Republicans were reportedly wary of committing to such an enormous spending package before more complete details become available.

Meanwhile, Trump’s seven-nation travel ban received a lukewarm—and, in some cases, hostile—reception from many in the business world who have traditionally depended on foreign talent. That’s especially the case in Silicon Valley, where close to 40 percent of all workers are foreign-born, according to the 2016 Silicon Valley Index. (Around the same percentage of Fortune 500 companies were founded by immigrants or children of immigrants, including Steve Jobs, whose biological father was Syrian.) One of the more dramatic responses toward the travel ban was Uber CEO Travis Kalanick’s dropping out of Trump’s business advisory panel, following an outcry from users of the popular ride-sharing app who saw his participation with the President as an endorsement of his immigration policies.

I’ve shared with you before that the media often take Trump literally but not seriously, whereas his supporters take him seriously but not literally. I think it’s evident that the market is finally coming to terms with the fact that Trump, unlike every other politician before him, actually meant everything he said on the campaign trail, including his more protectionist and nationalist ideas.

Although I don’t necessarily agree with Trump’s plans to raise tariffs, withdraw from free-trade agreements and restrict international travel, it might be easy to some to see why he feels American companies need protecting from foreign competition. Last week I attended the Harvard Business School CEO Presidents’ Seminar in Boston, and among the topics we discussed was China’s ascent as an economic and corporate juggernaut. Take a look at the chart below, using data from Fortune Magazine’s annual list of the world’s 500 largest companies by revenue. Whereas the U.S. has lost ground globally over the past 20 years, China’s share of large companies has exploded, from having only three on the list in 1995 to 103 in 2015. The number of Japanese firms, meanwhile, has more than halved in that time.

click to enlarge

I will say, while I’m on this topic, that the uncertainty and unpredictablilty surrounding Trump has given active management a strong opportunity to demonstrate its value in the investment world. Assessing the risks and implications of his actions, policies and tweets, which change daily, really requires a human touch that fund managers and analysts can provide.

Dollar Down, Gold Up

One of those implications is the U.S. dollar’s decline. Following Trump’s comment that it was “too strong” and hurt American exporters’ competitiveness, currency traders shorted the greenback, causing it to have the worst start to a year since 1987.

U.S. Dollar Has Rockiest Beginning of the Year Since 1987, Boosting Gold
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This, coupled with a more dovish Federal Reserve, expectations of higher inflation and growing demand for a safe haven, has helped push gold prices back above $1,200 an ounce. January, in fact, was the best month for the yellow metal since June, when Brexit anxiety and negative government bond yields sent it to as high as $1,370.

Gold Posts Its Biggest Monthly Gain Since June 2016
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Demand for gold as an investment was up a whopping 70 percent year-over-year in 2016, according to the World Gold Council. Gold ETFs had their second-best year on record. But immediately following the November election, outflows from gold ETFs and other products accelerated, eventually shedding some 193 metric tons.

But now, just two weeks into Trump’s term as President, the gold bulls are banging the drum, with several large hedge fund managers taking a contrarian bet on the precious metal.

Inflationary pressures are indeed intensifying. U.S. consumer prices rose 2.1 percent in December year-over-year, their fastest pace since 2014, and inflation across the globe is beating market forecasts, with the Citi Global Inflation Surprise Index turning positive for the first time since 2012. Anything above zero indicates that actual inflation is stronger than expectations for the month.

Global Inflation Beats Expectations in December for the First Time Since 2012
click to enlarge


Inauguration Day: Gold still consolidating around $1,200

Gold Today –New York closed at $1,201.50 on the 19th January after closing at $1,205.60 on the 18th January. London opened at $1,202.45 today.

 Overall the dollar is weaker against global currencies today. Before London’s opening:

         The $: € was weaker at $1.0679: €1 from $1.0652: €1 yesterday.

         The Dollar index was weaker at 100.97 from 101.20 yesterday. 

         The Yen was stronger at 114.73: $1 from yesterday’s 114.80 against the dollar. 

         The Yuan was almost unchanged at 6.8765: $1, from 6.8767: $1, yesterday. 

         The Pound Sterling was stronger at $1.2355: £1 from yesterday’s $1.2302: £1.

 Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    1    20

     2017    1    19

      2017    1    18










$ equivalent 1oz @  $1: 6.8765

      $1: 6.8767

$1: 6.8425







Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle Eat eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

Shanghai consolidated yesterday pulling back 3 Yuan or just over 1% with the Yuan a tiny bit stronger against the dollar. The fall does not indicate any more than a healthy correction.

Does this express a loss of pricing power? New York is at a $7 discount to Shanghai and London a narrowing of over $14. It would appear so [but only on a daily basis]. But Shanghai could drive prices tomorrow. We have to allow for corrections where demand on a daily basis [because prices have run too high?] pulls back and supply dominates for the short time it happens, before demand comes back at lower levels.

Some may feel that because London is the main physical market in the developed world it supplies China exclusively. Yes, the world’s main bullion banks are based in London, but they operate in both centers. Their hold over supply is far less than most believe. For instance the Rand Refinery in Johannesburg South Africa will sell to any buyer including the Chinese directly. It does not have exclusive agreements with the world’s main banks, as it had in 1974 with the three main Swiss Banks [the ‘pool’]. Shanghai buys from Switzerland and directly from producers/refineries. Hence we do not accept that London is the sole supplier of Shanghai. Add to that the profitability of the arbitrage trade which will smooth out price differentials. But because Shanghai is by far the largest physical gold market in the world, it does have pricing power normally.  We will see that in the next week/month.

LBMA price setting:  The LBMA gold price setting was at $1,199.10 this morning against yesterday’s $1,203.35. 

The gold price in the euro was set lower at €1,127.93 after yesterday’s €1,129.06 as the dollar weakened.

Ahead of the opening of New York the gold price was trading at $1,200.00 and in the euro at €1,128.77.  At the same time, the silver price was trading at $16.90. 

Silver Today –Silver closed at $17.00 at New York’s close yesterday from $17.08 on the 18th January. 

Price Drivers

On Inauguration Day we see President Trump take the reins. In addition, with the Republicans in the majority in both Congress and the Senate, government, at last is in a position to do something, without the opposition blocking it. The expectations are high, likely too high.

The U.S. economy is healthy so we are open to what the Fed also says as to interest rates. We don’t think they will change rates as they will want to see how the new President will move forward on respecting the economy. Only then will they act, or not.

The U.S. based gold ETFs continue to be relatively static after some buying recently. Exchange rates continue to have a major impact on the gold prices with China playing a strange game. All know that the Yuan should fall and the PBoC is targeting certain types of capital outflow, which do not benefit either the Yuan or the Chinese economy [such as wealth exiting China] but are still intervening in the Yuan exchange rate.

With such blocks on capital outflows, Chinese investors are favoring gold, which is a protection against a falling exchange rate of the Yuan. With gold such a strategic asset the government has encouraged Chinese investors to buy gold hence we do not believe that they have placed restraints on imports of gold.

Gold ETFs – Yesterday, in New York, there were no purchases or sales into or from the SPDR gold ETF (GLD) or the Gold Trustb  (IAU), leaving their respective holdings at 807.96 tonnes and 198.75 tonnes. 

Since January 4th 2016, 205.83 tonnes of gold has been added to the SPDR gold ETF and to the Gold Trust. 

 Julian D.W. Phillips: GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

UPDATE: Same old, same old. Yellen speaks, gold falls

Here’s a lightly edited version of my latest article posted on the Sharps Pxley website yesterday – trying to make sense of gold’s latest price movements as President Trump’s inauguration approaches.  Yet again today gold is testing the $1,200 level on the downside and this time around the level may not be held, particularly if the Donald’s inauguration address seems to be conciliatry, as it probably will be – but with Trump who knows?

Gold investors are obviously holding back until they see which way the wind blows.  The world’s biggest gold ETF, GLD, has seen no purchases or sales since last Friday when 2.96 tonnes were added.  GLD sales or purchases do seem to provide something of a guide to the gold price direction – in the US dollar at least, which looks to be strengthening a little today – indeed today’s gold price weakness may well be down to a small recovery in the dollar index.

The EDITED VERSION OF THE Sharps Pixley article follows:

Gold has had a decent run, after a sharp fall immediately following last month’s US Fed interest rate rise.  If one looks back to last year, the gold price was volatile, particularly before and after the various Fed Open Market Committee (FOMC) meetings and it looks that this year the same may happen all over again, but this time around gold price movement up or down may be tempered by the perceptions of how the USA’s 45th President’s proposed policies may affect the economy.  While the Fed may be set on at least three interest rate rises this year – Yellen’s San Francisco statement yesterday did nothing to suggest this wouldn’t happen – we still think they may play wait-and-see before pulling the interest rate trigger, although others, like the well-respected, but nowadays slightly alarmist commentator, Jim Rickards, think the Fed will move quickly and implement another 25 basis point increase as early as March.

This year’s FOMC meetings, at which interest rate decisions are usually made, are due to be held right at the end of this month (Jan 31-Feb 1), which is almost certainly too close to the President Trump inauguration (tomorrow) for any such decision to be made.  The following meeting will be on March 14-15 – Rickards’ suggested date for the next rate rise – then May 2-3 and June 13-14 bring up the balance of FOMC meetings in H1 2017. We think the Fed may err on the side of caution and wait for one of these latter two meetings to raise rates for the first time in 2017 – if at all – in order to see which way the economic wind is blowing after the first few months of office of perhaps the most divisive U.S. President ever.  However an early rate rise could be seen as a Fed attempt to regain credibility given its failure to match its own economic predictions in previous years.

For the record, the H2 FOMC meetings will be on July 25-26, September 19-20, October 31-November 1 and December 12-13.  Expect gold price volatility around all these dates, as we saw in 2016.  If the Fed does raise rates early and the U.S. economy looks stable, unemployment doesn’t rise and equity markets don’t collapse then there could be a further two, or even three, rises in H2, but the uncertainty around the Trump Presidency makes this far from a sure thing.

Yellen’s statement yesterday did reiterate that in her, and presumably her colleagues’, viewpoint the U.S. economy remains on course to be able to support three small interest rate hikes this year, and more next, with a potential target of ‘normality’ of around 3% by the end of 2019.  But the Fed has been notoriously poor in its predictions for the strength or otherwise of the U.S. economy over the past five years or so.  Has its forecasting suddenly improved.  The Trump Presidency could well throw the Fed’s projections into disarray yetr again – but this could go either way if the new President’s policies are perceived to be generally stimulative for the U.S. economy.

Yet Rickards, despite his prediction that the Fed will raise interest rates at the March FOMC meeting disagrees: “They (The Fed) will raise (rates) in March and then something will hit the wall, either the economy or the stock market or both. Then the Fed will backpedal from there, starting with a forward guidance then perhaps a rate cut later in the year,” he says on his blog, and recommends holding gold and U.S. 10-year Treasurys.

If Rickards is correct in his predictions, the gold price could fly in the final three quarters of the year as the Fed misses its interest raising opportunities again.  But others do see the U.S. economy, inflation and unemployment levels ticking all the boxes for the Fed’s interest rate raising plans going forward.

But so much will depend on President Trump and whether Congress will allow him to proceed with his plans to cut taxes, spend heavily on infrastructure to boost the economy and implement other fiscal stimuli and cut legislative blockages given the country’s huge debt position.  The Trump proposals, if implemented, can only increase debt!  If the Trump boost to the economy is thwarted – there may be a Republican majority in both houses, but there are a number of anti-Trump GOP members in Congress and coupled with probably blanket opposition from the Democrats still sore over the Trump Presidential Election victory – the Donald’s legislative path may thus not be an easy one.

The last day of April will see the Trump Administration’s first 100 days in office – a time when the media tends to make its first judgments of likely success or otherwise of the new President’s proposed programmes – and we believe the Fed should not take any interest rate raising decisions before then at least, although what we believe is a sensible course will hardly influence the FOMC in its deliberations!

What will the first 100 days see?  We think some of the proposed policies will have to be rolled back altogether and a number of compromises will have to be made to satisfy Congress, while the Senate may block one or more of the Presidents’ proposed cabinet members from taking office which coluld make for an adverse perception of President Trump’s promises and his ability to deliver on them..

Gold is testing the $1,200 level on the downside today, but the enormous opposition to Trump as President, which will likely be highlighted by huge demonstrations in the nation’s capital, may sober the equity markets and boost gold again temporarily – but thereafter volatile markets are likely until a much clearer idea of where Trump policies are taking the nation become apparent.

Perhaps precious metals investors should take heart though from my colleague Ross Norman’s price predictions for the current year – See:  Sharps Pixley Forecasts Gold To Average $1310 With A High Of $1390 In 2017

Precious metals outlook 2017

By Clint Siegner*

Precious metals had a wild ride in 2016, launching higher in the first half of the year and then falling much of the way back to earth in the second half. Our outlook for 2017 hinges on some of the drivers that figured prominently in last year’s trading. There are also a couple of new wrinkles.


We’ll start with some fundamentals that metals investors have become well acquainted with in recent years. The troubles plaguing Europe seem to be forgotten, but they certainly aren’t gone. The question is whether or not officials in Europe will be able to keep the wheels on in 2017.

Several major European banks remain in jeopardy, plagued by bad debts, too much leverage, and mounting legal expenses. Germany’s Deutsche Bank (DB) was often in the headlines last year as its share prices made all-time lows. Deutsche Bank paid out $60 million to settle charges of manipulating the gold market.

Tattered EU Flag

In addition, regulators in the U.S. had proposed a crushing $14 billion fine related to the bank’s marketing of dodgy mortgage backed securities prior to the 2008 financial crisis.

Since then share prices have recovered significantly. The bank agreed last month to a settlement of just over $7 billion, roughly half the amount originally proposed but still a hefty penalty. The bank’s loan book still looks ugly and its exposure to risky derivatives remains a wild card.

The recent failure of Italy’s third largest bank – Monte dei Paschi – may put the spotlight back on the European banking sector. Particularly if other institutions, such as Deutsche Bank, have been aggressively selling credit default swaps they will now have to pay out on.

Investors grappled with the Brexit referendum in 2016. This year they will find out if Britain’s vote to leave the EU will actually get implemented. Negotiations around the departure are expected to commence in May.

Italians are going to select a new government shortly and there are elections coming up in Germany, France, and the Netherlands in the months ahead. Anti-European Union forces are making real headway in the polls.

This year looks pivotal for the EU, the euro as its currency, and its banks. Turmoil there will boost safe haven buying in precious metals and the U.S. dollar. Alternatively, should the establishment and the banks weather the storm, metal prices could suffer, at least in terms of euros. Right now, turmoil in Europe looks like the better bet.

The Fed

Once again markets enter a new year in thrall to Janet Yellen and the rest of the Federal Open Market Committee. Like last year, we just had one rate hike. Officials are telegraphing three to four additional hikes in the coming 12 months.

Last time around the stock market suffered stimulus withdrawals. Fed officials threw in the towel and reversed course almost immediately. We can expect officials are watching equity prices carefully now. If the S&P 500 keeps powering ahead, they’ll have the cover they need to deliver rate increases.

United States Federal Reserve System

If, on the other hand, we find out that markets are still addicted to low rates and officials can’t tolerate the pain of a withdrawal it will be bad news for the dollar and good news for metals.

A Donald Trump Presidency

The election of Donald Trump is what makes this year different. Many people are optimistic about the prospects for a major infrastructure program, tax cuts, and less regulation. Investors are ready to take on risk. Since the election, they have been mostly getting out of safe haven assets such as bonds and gold, while paying top dollar for stocks.

The rub is that Trump has yet to assume office. The expectations are high and, frankly, something has to give. Trump might deliver a big infrastructure program and some tax relief. However, that would spell trouble for the current dollar rally as people anticipate ballooning deficits and borrowing.

Or, Trump may find his proposed measures are easier said than done. Republicans control Congress, but there is no certainty they will accept big spending increases and even higher deficits. If optimism bumps up against a bleaker political reality, it’ll be bad news for investors playing the Trump rally.


2016 closed with investors positioning for smooth sailing and economic growth. They may get it but a number of things will have to go right. If they don’t, jettisoning safe haven assets to buy stocks at record high valuations won’t look like a very good idea.

Inflation Expectations for 2017 Keep the Polish on Gold

By Frank Holmes – CEO and Chief Inmvestment Officer U.S. Global Investors

Inflationary Expectations 2017 Keep Polish Gold

Inflation can be understood as the destruction of a currency’s purchasing power. To combat this, investors, central banks and families have historically stored a portion of their wealth in gold. I call this the Fear Trade.

The Fear Trade continues to be a rational strategy. Since President-elect Donald Trump’s surprise win a month ago, the Turkish lira has plunged against the strengthening U.S. dollar, prompting President Recep Erdogan to urge businesses, citizens and institutions to convert all foreign exchange into either the lira or gold. Most obliged out of patriotism, including the Borsa Istanbul, Turkey’s stock exchange, and the move has helped support the currency from falling further.

Gold Save Turkish Lira
click to enlarge

Venezuela, meanwhile, has dire inflationary problems of its own. Out-of-control socialism has led to an extreme case of “demand-pull inflation,” economists’ term for when demand far outpaces supply. Indeed, the South American country’s food and medicine crisis has only worsened since Hugo Chavez’s autocratic regime and the collapse in oil prices. The bolivar is now so worthless; many shopkeepers don’t even bother counting it, as Bloomberg reports. Instead, they literally weigh bricks of bolivar notes on scales.

“I feel like Pablo Escobar,” one Venezuelan bakery owner joked, referring to the notorious Colombian drug lord, as he surveyed his trash bags brimming with worthless paper money.

Because hyperinflation has destroyed the bolivar, the ailing South American country sold as much as 25 percent of its gold reserves in the first half of 2016 just to make its debt payments. Venezuela’s official holdings now stand at a record low of $7.5 billion.

Trump-Carrier Deal a Case Study in U.S. Inflation

visited Bloomberg TV studio today rates gold

The U.S. is not likely to experience out-of-control hyperinflation anytime soon, as the dollar continues to surge on bets that Trump’s proposals of lower taxes, streamlined regulations and infrastructure spending will boost economic growth. But I do believe the market is underestimating inflationary pressures here in the U.S. starting next year.

As I explained to Scarlet Fu and Julie Hyman on Bloomberg TV last week, inflation we might soon see is largely caused by rising production costs, which is different from the situation in Turkey and Venezuela.

Nevertheless, it still serves as a positive gold catalyst for 2017.

Consider Trump’s recent Carrier deal—the one that saved, by his own estimate, 1,100 jobs from being shipped to Mexico. We should applaud Trump and Vice President-elect Mike Pence for looking out for American workers, but it’s important to acknowledge the effect such interventionist efforts will have on consumer prices.

Trumps jobs Carrier indicative protectionist policies

As I see it, the Carrier deal is indicative of the sort of trade protectionism that could spur inflation to levels unseen in more than 30 years. The Indiana-based air conditioner manufacturer has already announced it will likely need to raise prices as much as 5 percent to offset what it would have saved by moving south of the border.

We can expect the same price inflation for all consumer goods, from iPhones to Nikes, if production is brought back home. That’s just the reality of it. Prices will go up, especially if Trump succeeds at levying a 35 percent tariff on American goods that are built overseas but imported back into the U.S. The extra cost will simply be passed on to consumers.

What’s more, Trump has been very critical of free trade agreements, threatening to tear them up after blaming them—NAFTA, specifically—for the loss of American jobs and stagnant wage growth. There’s some truth to this. But trade agreements have also helped restrain inflation over the past three decades. This is what has allowed prices for flat-screen, plasma TVs to come down so dramatically and become affordable for most Americans.

International Trade Deals Slowed Inflation
click to enlarge

In its 2014 assessment of NAFTA, the Peterson Institute for International Economics (PIIE) calculated that for every job that could be linked to free trade, “the gains to the U.S. economy were about $450,000, owing to enhanced productivity of the workforce, a broader range of goods and services, and lower prices at the checkout counter for households.”

Additional tariffs and the inability to import cheaper goods are inflationary pressures that could result in a deeper negative real rate environment. And as I’ve pointed out many times before, negative real rates have a real positive effect on gold, as the two are inversely correlated.

Inverse Correlation Between Gold Real Fed Funds Rate
click to enlarge

Macquarie research shows that last year, ahead of the December rate hike, gold retreated about 18 percent from its year-to-date high. Afterward, it gained 26 percent in the first half of 2016. The decline so far this year has been about 15 percent from its year-to-date high. Gold, according to Macquarie, is setting up for another rally in a fashion similar to last year.

Central Bank Demand Could Accelerate on Growing Federal Debt

The U.S. government is currently saddled with $19.9 trillion in public debt. Since 2008, federal debt growth has exceeded gross domestic product (GDP) growth. And according to a Credit Suisse report last week, Trump’s tax proposal, coupled with deficit spending, could cause federal debt to grow even faster than under current policy.

After analyzing projections from a number of agencies and think tanks, Credit Suisse “estimates a federal debt-to-GDP of 92 percent by 2026, including a GDP growth offset from the lower tax tailwind, and 107 percent excluding the GDP growth offset.”

Higher US Budget Deficits Debt Spur Banks Increase Gold Buying
click to enlarge

The U.S. dollar accounts for about 64 percent of central banks’ foreign exchange reserves. With the potential for higher U.S. budget deficits and debt risking dollar strength, central banks around the globecould be motivated to increase their gold holdings, says Credit Suisse.

Waiting for Mean Reversion

As I mentioned last week, gold is looking oversold in the short term and long term, down more than two standard deviations over the last 20 trading days. Statistically, when gold has done this, a return to the mean has often followed. This has been an attractive entry point for investors seeking the sort of diversification benefits gold and gold stocks have offered.

In a note to investors last week, ETF Securities highlighted these diversification benefits, writing that a gold allocation has “historically increased portfolio efficiency—lowering risk while increasing return—compared to a diversified portfolio without an allocation to precious metals.”

As always, I recommend a 10 percent weighting: 5 percent in gold bullion, 5 percent in gold stocks, then rebalance every year.

Italian referendum : Gold confounds – again

Here’s a lightly edited version of my thoughts on gold’s contrary reaction to the result of the recent Italian referendum which led to the resignation of Italian Prime Minister Matteo Renzi.  Article was published on SharpsPixley.com (I publish articles on Sharps Pixley as I generate a small amount of income whereas I have not tried to commercialise lawrieongold which comes to you free of charge.)

I suppose we should have expected it after the Brexit vote and the Donald Trump US Presidential vote result, but yet again a plebiscite, whose result would normally have been expected to give a significant boost to the gold price appears to have had the opposite effect.  This time it was the Italian referendum which saw a significant defeat for would-be reformist Prime Minister, Matteo Renzi, and his as-promised subsequent resignation.  True, as with the Trump and Brexit votes, once it became apparent which way the results would go, the gold price spiked upwards, but then it was brought down sharply as global markets opened giving further fuel to the conspiracy theorists claims that the financial and governmental elite is working in concert to suppress the global gold price. (Ed Steer who picked the article up in his own newsletter calls it conspiracy fact! – for details on his service click on edsteergoldandsilver.com )

The problem for gold is that strength in the yellow metal’s price is generally seen as recognition that the global economy is indeed in a parlous state and neither the big money, nor the politicians, want to see this interpretation gain public credence.  For the former it would mean a market collapse, perhaps of epic proportions, destroying wealth, and for the latter it would damage the carefully orchestrated perceptions that all is well with the global economy, despite plenty of indicators that this is not the case – not least the debt mountains which have been built by many of the world’s major economies.

Modern day politics is all about perception.  If people can be led to believe that all is well they will continue spending at levels that will indeed help the economy.  In the U.S. for example there is plenty of evidence from non-massaged statistics, that the average person is worse off than they were a few years ago – in some cases substantially so.  Yet we have just seen a consumer spending splurge on Cyber Monday which has broken all records.  This is obviously unsustainable, but how long will it be when this perception that all is well with the world is just a myth is understood by the majority of the general public?

In part the Italian, US and UK votes  highlighted above may also signify that this comfortable existence may indeed be on the way out, albeit perhaps just the beginning of such perception.  All three are being seen as votes against the establishment, but in no case has the majority been large enough to carry much more than 50% of the vote (less in the case of the Trump victory) so there is still a very substantial number of people out there apparently still happy with the status quo.  The ‘protest vote’ will have to grow much further if we are to see any serious perception change.

Part of the underperformance of gold against expectation after the Italian result has been put down to dollar strength, given a sharp fall in the euro as the result was confirmed  which is seen as having the potential to upset the euro applecart and precipitate an Italian  banking system meltdown with a correspondingly adverse impact on the whole European banking sector to which the Italian banks are severely in debt.  But the resultant dollar strength has been shortlived, while gold has remained well down on its Friday close – despite Shanghai trying to give it a boost with a pm gold benchmark price, as calculated by kitco.com, of $1,198.11 – over $20 higher than the Globex spot price at the time.

Parallels between Brexit and US Presidential election polls. Buy gold!

You can’t write off Donald Trump’s chances of becoming the next US President whatever the polls might suggest.  Most polls put Hillary Clinton in the lead – but not by much – and if the battleground states go the way the polls are suggesting it would only take Florida to move from a likely Democrat win to a Republican one to swing the electoral college votes in favour of The Donald.  The latest Realclearpolitics.com electoral map with no ‘toss-ups’ (i.e those states which appear to be tending one way or the other are in as wins for whichever candidate is in the lead at the time) suggests a Clinton victory with 292 electoral votes against Trump’s 246 – it takes 270 to win the nomination.  But, one of the states which is down as a Clinton victory on this basis – Florida with 29 electoral college votes – is far too close to call and seems to be trending in Trump’s direction.  Do the maths.  If Florida ends up for Trump, and the other states stay as predicted, Clinton would end up with 263 electoral college votes and Trump with 275!

Both candidates are hugely unpopular with a large sector of the US public and it may just come down to which candidate’s campaign can get the votes out.  Parallels with Brexit here.  The Exit campaign had more committed voters than the Remain campaign and other polls have suggested that Trump supporters may be more likely to turn out than Clinton ones.  With Bernie Sanders now stating he is an independent, rather than  a Democrat, some of the big numbers who wanted him as the Democratic nominee may well decide not to vote.  That would be a serious blow for Clinton

There’s also the question of the accuracy of polling.  The high profile political, economic and celebrity supporters appear to be almost all anti-Trump.  His candidacy is ridiculed by many supposed opinion-leaders.  Because of this one suspects that a number of people contacted in telephone polls will not like to admit they will be voting for Trump, even though that’s the way they will go.  More parallels with the Brexit polls.  With nearly all the big political and economic guns pressing for a Remain vote it appears that some questioned in telephone polls did not give an honest answer as to which way they would vote because they feared they would seem to be naïve to the poll conductors.  Human nature.  You don’t want to sound ignorant, uninformed or perhaps racist when talking to a stranger.

So don’t be totally surprised if the polls stay roughly where they are now, assuming neither candidate totally disqualifies themselves, but the result comes out differently.

Interestingly, a respected Professor – Alan Lichtman of DC’s American University – claims to have developed a formula of 13 key points which has correctly predicted the last eight Presidential elections.  If the incumbent political party fails to meet at least six of these points, they will lose the election. See article on the CW33.com website: Professor Who Accurately Predicted Last 8 Elections Says Trump Will Win for details of the specific key points in Lichtman’s analysis.  In his view the Democratic party fails on at least six of these.

If Trump were to win, the American political and economic elite will be shell-shocked – not to mention most of the African American and female population of the U.S.A.  Markets will probably be thrown into turmoil in the U.S. – and around the world too – as Trump is seen as both mercurial and unpredictable.  He’s basically a hard-nosed businessman perhaps unsuited to the diplomatic niceties that global leaders expect from other political leaders.  Getting his own way regardless of opposition would be the norm.  Thus a Trump victory would be the biggest Black Swan event of the year and would generate huge global uncertainty.  Gold thrives on uncertainty.  Need I say more.

It takes one back to the episode of The Simpsons TV cartoon where Lisa Simpson becomes President and on entering the Oval Office is informed that the previous President – one Donald Trump – has bankrupted the country.   In any realistic financial terms, if Trump wins he will be inheriting leadership of a nation which is already technically insolvent anyway.  He has already sounded off about the Fed driving America to rack and ruin and could take steps to drastically change the status quo, but whether his remedies might make the current situation better or worse, who knows?

Prior to the UK’s Brexit vote we advised readers to buy gold against the possibility – small though it may have seemed at the time – of the UK voting to leave the EU – not only because we felt the gold price would rise in the aftermath of such a vote, but also that the pound sterling would fall.  Gold would be a wealth protection insurance in such a case, but without serious downside risk attached. if the vote went as the polls were predicting  That proved to be wise advice!

Perhaps now we should suggest that Americans do likewise with a similar potential scenario in sight should Trump come out on top  Resultant uncertainty could drive the dollar down and gold up – which amounts to the same thing in some economists’ minds.  Roll on November 8th and free us all from our uncertainties.

The above is a lightly edited and updated version of an article I have already published on the Sharpspixley.com website

Gold firms after fall to support again

Gold TodayGold closed in New York at $1,335.30 on Monday after Friday’s close at $1,336.40.  London opened at $1,333.

    • The $: € was up at $1.1092 from $1.1096.
    • The dollar index rose to 96.35 from 95.30 Monday.
    • The Yen was slightly stronger at 102.32 from Monday’s 102.41 against the dollar.
    • The Yuan was weaker at 6.6614 from 6.6616 Monday.


  • The Pound Sterling was weaker at $1.2990 down from Monday’s $1.3042.


Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  08  9

2016  08  8







Dollar equivalent @ $1: 6.6615

$1: 6.6614





With the exception of the pound sterling, which continues to weaken substantially, all other currencies were stable in the day.

We note that the thinking in the Chinese media is that the Yuan will continue to drop. Official policy likes to be broadcast in the media, so we expect the falls to continue towards 7.00 to the U.S. dollar.

It is important to note that Chinese demand for gold is down when one looks at the withdrawals from the Shanghai Gold Exchange.

But we note two factors; first this is not due to a fall-off in the growth of the Chinese middle classes, which continue to burgeon, as is evidenced by auto demand in the country and secondly that Shanghai gold prices are not driving global gold prices at the moment.  Likewise Indian demand!

We cannot see this happening until gold availability in London falls to the point that liquidity drops to almost critical levels. Certainly London’s liquidity levels have reduced substantially over the last two years. If U.S. demand combines with Asian demand we will see a change in pricing power.

LBMA price setting:  $1,332.90 after Monday 9th August’s $1,330.00.

The gold price in the euro was set at €1,202.11 up €2.07 from Monday’s €1,200.04.

Ahead of the opening in New York the gold price stood at $1,333.55 and in the euro at €1,203.08.   Post opening gold and silver both gained in strength with gold moving above $1,340.

Silver Today –The silver price closed in New York at $19.73 on Monday up from $19.70 on Friday.  Ahead of New York’s opening the price was trading at $19.63.

Price Drivers

Gold and silver held remarkably steady yesterday in the face of a large sale of gold from the SPDR gold ETF. The gold price continues to rest on support and with the gold season nearly on us the physical market, at least will see demand grow significantly. In the U.S. fears of a global slowdown [and low productivity] affecting the U.S. economy and the large number of potential banking and debt crises that are more than likely, the atmosphere for gold continues to be positive.

A President Trump has announced he will institute a cutback in Corporate Tax to 15% that should be sufficient to encourage many non-manufacturing companies to return to the U.S. Why not manufacturing? Because the wage differentials between U.S. wages and developing countries wages, remains substantial!  But Trump certainly knows how to press the buttons of the electorate. We can only reflect that the ridicule heaped on him as a Republican Presidential Candidate did not stop him, so the ridicule we now see for him may follow the same road.

Gold ETFs – In New York on Monday there were sales of 6.531 tonnes sold from the SPDR gold ETF but nothing from or to the Gold Trust. This left their respective holdings at 973.805 tonnes and 220.40 tonnes.

Since January 4th this year, the holdings of these two gold ETFs have risen by 396.59 tonnes.

Silver –Silver prices have been more stable than gold in the last day, but this is simply marking time before gold moves again.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance [Gold Storage geared to avoid its confiscation]


Trump takes lead in U.S. polls. Gold may benefit if lead continues

For those who believe that the election of Donald Trump as U.S. President in November is as unlikely as a vote for the UK was to leave the EU – be afraid, be very afraid!  The latest survey of opinion polls in the USA puts the Donald in the lead.  Here are a couple of screenshots from U.S. website realclearpolitics.com, which monitors the latest opinion polls, which show a Trump surge into the lead over Democrat rival Hillary Clinton, following the end of the Republican National Convention and the beginning of the Democratic one.



For better clarity in the above chart and table, and for updates click on: http://www.realclearpolitics.com/epolls/latest_polls/elections/ 

Now there are still a little over three months to go before the US Presidential Election takes place  on November 8th, but for the anti-Trump sector of the US electorate  – which has some  strong demographic parallels with the anti-Brexit voters in the UK, the latest trends have to be extremely worrying.  Although as the UK learnt, polls can turn out to be very wrong in a strongly divided nation.  And this forthcoming US Presidential election is perhaps the most politically divisive yet.

By all logic, Donald Trump’s bombastic campaigning statements should have alienated Women, Blacks and Hispanics alongside died-in-the-wool Democrats which would suggest he is unelectable.  But, in Hillary Clinton, the Democrats have chosen a candidate who is anathema to virtually all Republicans of any gender or race, and may well prove to be equally unpopular with a significant sector of voters who would normally support the Democrat ticket – primarily male blue collar and working class voters.  The US may have been ready for a black leader in President Obama, but are they ready for a woman?

So, as we noted here pre the Brexit vote in the UK, there was sufficient underlying anti-EU feeling in the country to make the eventual outcome decidedly uncertain.  There thus may well be sufficient underlying anti-Hillary sentiment in the US, fuelled by an ongoing, and effective, Republican campaign casting doubts on Hillary Clinton’s financial dealings and past decisions – including the hugely contentious use of her private email account to handle matters of national security – as to her suitability to occupy the Oval office.

Three months is an enormously long time in politics – particularly in one of the most vicious Presidential campaigns ever.  But some mud will undoubtedly stick and the eventual  outcome may well depend on which of the contenders it sticks to most!

As election day approaches, and if the polls still suggest a close race – and in particular if they continue to put Trump in the lead – one should probably expect a strong safe haven move into gold.  The Donald is believed to favour gold and may also be more inclined to review the position of the U.S. Federal Reserve and its policies.  It could be a very interesting three months ahead.

A Trump Presidency would be positive for gold and silver

Gold TodayGold closed in New York at $1,333.10 on Thursday after Wednesday’s close at $1,319.30.  

    • The $: € was barely changed at $1.1028 down from $1.1029.
    • The dollar index fell to 97.01 from 97.00 Thursday.
    • The Yen was slightly stronger at 106.21 from Wednesday’s 107.02 against the dollar.
    • The Yuan was stronger at 6.6722 from 6.6742 Thursday.


  • The Pound Sterling was weaker at $1.3184 down from Wednesday’s $1.3254.


Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  07  22

2016  07  21







Dollar equivalent @ $1: 6.6722

$1: 6.6742





Shanghai prices were slightly less than at New York’s close, while London tried to pull prices lower at the opening.

The main bullion banks can arbitrage positions using the funds they have in all centers. Likewise the ICBC, the main Chinese bullion bank in China and a gold market maker in London can do the same, buying and selling gold without moving it across borders. This is acceptable to the Chinese monetary authorities as it involves a large use of Renminbi [Yuan] internationally.

Consequently, we are seeing the gold price smoothed out across the world. So a conclusion that can be drawn is that gold prices are in sync globally.

Nevertheless, this does not mean that there is a globally liquid gold market reflecting gold’s demand and supply. Traders and speculators continue to dominate prices, while physical gold continues to express a very different market sentiment as it moves into U.S. gold ETFs and across to Asia.  At some point in the future the two different markets will come together in a most dramatic way.

LBMA price setting:  $1,322.00 the same as Thursday 21st July’s $1,322.00.

The gold price in the euro was set at €1,198.98 down €1.10 from Thursday’s €1,200.08.

Ahead of the opening in New York the gold price stood at $1,325.05 and in the euro at €1,202.84.  

Silver Today –The silver price closed in New York at $19.85 on Thursday up from $19.61 on Wednesday.  Ahead of New York’s opening the price was trading at $19.68.

Price Drivers

Last night’s acceptance speech from Donald Trump was of significance to gold and silver prices should he become President.

Many believe he stands little chance of becoming President, just as the vast majority of Americans did not think he had a chance of becoming the Republican Presidential nominee when the selection process began. So the chances of him becoming President are more than a possibility. His message is pertinent.

He intends following a policy of what is clearly protectionism and a move away from globalization. This will not only be negative for growth, but disruptive and divisive for the global economy.

As it is, the global monetary system is marching determinedly to a multi-currency system. A President Trump will rapidly accelerate this process. The need for gold in ‘Official’ hands will grow in such an environment to smooth out the ruptures in cash flows between nations across the world.

Silver is likely to rapidly increase its pace towards a recognized monetary metal in that environment too.

A President Trump would be gold & silver price positive!

Gold ETFs – In New York on Thursday there were sales of 2.079 tonnes of gold from the SPDR gold ETF, leaving their holdings at 963.142 tonnes and purchases of 0.6 of a tonne into the Gold Trust, leaving their holdings at 217.54 tonnes.

Since January 4th this year, the holdings of these two gold ETFs have risen by 383.091 tonnes.

Silver –Silver prices continue to fall, relative to gold.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance [Gold Storage geared to avoid its confiscation]


Brits and Europeans may find Gold attractive as Brexit possibility looks stronger


Here’s a lightly edited version of an article I published on the info.sharpspixley.com website a day or so ago following the two Guardian opinion polls – one by telephone and one online – suggesting that a UK vote to leave the EU (the Brexit option) is a real possibility.  One suspects one result will be a redoubling of the Remain campaign in the 3 weeks up to the actual referendum and with most of the big guns supporting it, this may swing the final vote back to Remain.  But the Remain camp will now be much more nervous about the final result!

In recent weeks the majority of opinion polls in the U.K., and perhaps even more significantly the bookmakers, had been predicting that the U.K. electorate would be voting to Remain in the European Union by a comfortable margin rather than the Leave the EU option (Brexit).  Indeed some commentators had virtually written off the likelihood of Britain voting for Brexit.  The fear of the unknown in terms of the potential effects on the British economy, in particular, which has been highlighted by the Remain camp, almost ad nauseam, appeared to be winning the day.  True there had been the occasional outliers suggested by some online polls which were often disregarded as being less likely to be accurate than telephone polling which was consistently showing strong support for Remain.

But the latest polls for The Guardian newspaper by polling company ICM, which conducted simultaneous online and telephone polls, have really put the cat among the pigeons with both suggesting a 52%-48% Brexit lead, despite most of the country’s heavyweight politicians, including the leaders of the major political parties – Conservatives, Labour, Liberal Democrats and Scottish National Party – all being strongly in the Remain camp.  The only political party wholly in favour of a Brexit is UKIP, led by the charismatic Nigel Farage, which the mainstream supporters of a vote to leave have tried to sideline given the perceived make-up of  many of UKIP’s followers – seen in something of the same light as Marine Le Pen’s Front National in France.  The remain camp has been supported in its dire warnings of what an economic disaster it would be for the U.K. to leave the EU by such major global figures as U.S. President Barack Obama, German Chancellor Angela Merkel, IMF Head Christine Lagarde and a host of other global political and economic heavyweights.

The trouble is that a large sector of the British public is ever more distrustful of statements from major politicians and just doesn’t believe, or don’t care about, the figures being bandied about.  They are probably prepared to accept a limited downturn in the U.K. economy in exchange for winning on the arguments which may appeal most to the person-in-the-street.  These include regained Sovereignty (in other words getting away from U.K. laws being subject to override by EU ones, and the pre-eminence in the legal system of the European Court of Justice); fear of potential unlimited immigration by EU nationals (probably not a problem when the EU was much smaller only incorporating the most wealthy European nations, but now with a 28-nation EU, and the prospect of it being further enlarged as time goes, by including countries with some much poorer economies, it becomes a worry in terms of the nation finding it hard to cope with the demands of high immigration levels completely outside its control); and border security in terms of terrorists coming in via the EU open borders (which is an additional aspect of the same worry).

Perhaps the most interesting assessment of what would happen to the U.K. economy came from the well-respected Institute for Fiscal Studies (IFS), an independent think tank (if anyone in this argument can be truly seen as truly independent).  It assessed that leaving the EU would lead to two more years of austerity as the economy struggles to get back on track post a Brexit decision.  However it also suggested that some of the economic disaster figures being put about by the vote Leave campaign were somewhat exaggerated and the U.K economy would eventually recover, but that it could take some time.  It also assessed, on the other hand, that the economic predictions put out by the Brexit campaign were ‘absurd’.  No words minced there then!

Latest analysis from the OECD also confirms the opinion that the U.K.’s economy would be hit significantly in post Brexit years should there be a leave vote but that also there would be “substantial negative consequences for the United Kingdom, the European Union and the rest of the world”.

But it could be the sovereignty issue which wins the day.  The British, as an island nation, are inherently insular and while the populace largely accepts the country is part of Europe geographically, the idea of closer political union into a European Federal State – the avowed aim of many EU intellectuals – appals them.  And whatever the politicians say and promise, if Britain remains in the EU, there is a strong belief that there will indeed be an ultimate progression into absorption into a European mega-state – by then probably incorporating additional nations including the latest political football in this respect – Turkey.  Someone on the Brexit side gave an undoubtedly hugely exaggerated estimate that 12 million Turks would want to move to Britain if it became an EU member (and would have the right to do so through the EUs open borders policy).  This is undoubtedly a ludicrous figure, but such numbers stick in people’s minds.

So what does all this mean for gold?  The geo-economic uncertainty engendered by a Brexit vote would probably lead to a higher price.  However an immediate knee-jerk reaction would likely see a dive in the value of the pound sterling against the US dollar and a likely decline in the value of the euro too given the boost a Brexit would give to anti-EU sentiment in many other member states.  Given that the gold price is set in US dollars there would seem to be a strong logic for investors in the EU, and in the U.K. in particular, to add some gold to their portfolios as insurance – and an insurance which could well appreciate even more given that the yellow metal would likely react positively to a Brexit decision.

There is obviously a slight risk in this policy.  Should the Remain vote prevail – and believe me there will be a huge amount of effort by the big political guns and most of the media, which tends to be Remain supportive, to persuade the general public of doom and gloom should the electorate vote to leave – there would be a collective sigh of relief and the pound and euro would likely rise as a result and thus the gold price fall in the pound and euro.  But we feel any such surge would be shortlived and there would be a quick return to the status quo prevailing beforehand.  But the positive fundamental prospects for gold in the medium to long term would remain given doubts about physical gold supply availability in the light of still huge demand and some major global geopolitical uncertainties .  The downside risks are thus quite low, but the positive upside should Brexit happen would be strong.  Gold has always been a wealth protection insurance asset and this possible short term event, and its likely immediate effects, would seem to make this a very wise insurance policy to follow.  Indeed the positivity would likely be further advanced as there would be some significant destabilising global knock-on effects, as the OECD warns, which would also be likely gold price positive.

And looking only a few months further ahead there is also the possibility, growing by the day it seems, of a Trump Presidency in the USA.  Now what would that mean for gold?………..

Is the force now with gold?

Excerpt from my latest posting on sharpspixley.com entitled: All change in gold sentiment, but can it persist.

Back in December gold had few, if any, friends among the mainstream analysts.  The US Federal Reserve was going to start raising rates and all the experts knew that so doing would lead to a rise in the value of the US dollar and a consequent fall in the gold price.  Apart from the usual suspects, gold had virtually no supporters.  But three weeks after the Fed did indeed start to raise interest rates, the whole sector began to turn completely around.  General equities fell and gold started to rise, while the dollar rose, then stuttered backwards.  So much for expert opinions.

Gold’s performance has been little short of spectacular so far this year, with an increase to date of around 18% in just over 2 months.  Equities have made something of a recovery in the past few days, but as a guide the S&P 500 is down a couple of percent year to date.  In Europe the UK’s FTSE 100 is flat, Germany’s DAX is down 4% and in Asia Japan’s Nikkei 225 has fallen nearly 8% while China’s SSE Composite is down almost 13%.

Gold thrives on uncertainty and in the US and Europe there are some huge political uncertainties out there……….

To Read full article click here