Eric Sepanek
SBC Founder
Eric Sepanek is the founder of Scottsdale Bullion & Coin, established in 2011. With extensive experience in the precious metals industry, he is dedicated to educating Americans on the wealth preservation power of gold and silver.
President Trump’s promise to stimulate the American economy excited the stock market, but his comments just weeks before his inauguration sent investors running back to safe haven investments like gold. In an interview with The Wall Street Journal, Trump said the dollar is “too strong,” effectively shooting the currency down from its 14-plus-year high and causing serious concern over what his administration has in store for the country. 1
Post-Election Market Rally
Political and economic factors influence markets in the short-term. Brexit last June and the U.S. election in November are two examples of political events that had a tremendous impact on precious metals prices in 2016.
The steady onslaught of alarming global economic and political news drove gold prices up in H1 2016. The desire for safe haven investments that could protect the value of portfolios hit record levels during this period. In fact, high bond risk created further demand for safe alternatives to traditional assets.
However, the U.S. selection of Donald Trump as the next president injected optimism into the global markets, and interest in paper assets peaked. Expectations that Donald Trump and team members like Steve Mnuchin would undertake a number of aggressive economic steps, such as tax cuts and financial deregulation, caused people to forget temporarily about the remaining risks to the global economic framework.
Gold Price Rebound
An increasing number of investors are returning to a more realistic view of economic and political factors at home and abroad. As post-election optimism wanes, the glitter of gold is again creating demand and pushing gold prices upward.
President Trump’s recent comments on the dollar accelerated market disillusionment with his policies and promises. Concerns over the weight behind his comment were just part of the effort to read the tea leaves of the new administration.
The recent upward trend in the price of gold and other commodities reflect both continued uncertainty about U.S. policies and the constant global risk, according to a UBS report. “We think this is warranted and see room for gold to extend upwards as markets digest uncertainty around U.S. fiscal policy,” noted UBS.
Long-Term Gold Price Predictions
Senior strategist Koen Straetmans of NN Investment Partners addressed the short-term impact of potential market disruption and protectionism: “Increased geopolitical risk or an increase in protectionism could just as easily lead to commodity supply disruption, sending prices higher in the near term…”
Concerning the long term, Straetmans predicted a positive correlation between political uncertainty and precious metals prices. This prediction aligns with common gold investor knowledge: political and economic crisis is one of the major factors that influence gold prices.
Additional Sources