Is Trump Bad News For Gold After All?

Is Trump Bad News For Gold After All? by Claudio Grass

“Unexpected” is an understatement when describing the outcome of the US presidential elections. Trump’s win defied all odds, rattled markets and shook social media. Clinton had maintained a steady lead for months in almost every national poll and early voters’ count. The media was confidently pushing this narrative, doubling down on their numbers projecting a clear Hillary win. However, to the elites’ great dismay, Trump came, he saw and he conquered: the presidency, Congress with its two chambers and the governors’ race.

These results delivered a major blow to the establishment that Trump fought hard against in this long and fierce campaign. The markets, having also placed their bets with Clinton, were caught off guard as well. On election day at midnight, futures for the benchmark S&P 500 and Dow Jones Industrial Average indexes fell by over 4% as the Trump victory became more likely. Meanwhile, gold prices surged by nearly 5% to a 6-week high of USD 1337.40/oz before the election results were final. Traders went for the safe-haven asset, believing that a Trump administration would lead to political uncertainty. But then everything changed: Stock markets not only recovered, they reached new record-highs in what became known as the “Trump rally”. Conversely, gold prices went in the other direction, and by the end of the year had dropped 16% from its peak last summer.

Does that mean that gold is in a bear market? We argue this is temporary and that a Trump administration is actually good news for gold! In fact, we see this moment as a unique opportunity to buy at these low levels, before the market euphoria ends, and the very real, fundamental problems of our economic system resurface once again. In this article, we outline the reasoning behind our optimism.

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