Gold Leads the Way as Trump Raises Suspicion in the Markets
The Dow Jones industrial index has now fallen from its record setting 20,100.91 close on January 26th. The index has now fallen more than 200 points from that historic high and further losses are possible during the week. Other indexes have followed suit, with the S&P 500 also registering losses. Confidence in the US Dollar was also affected by President Trump’s executive orders on immigration. The price of the Greenback slid, registering losses against 10 major currencies. Gold investors however, are profiting from the situation. Gold prices have had their best monthly gain since June 2016.
Trump did what he promised, the Fed is seen as Flip-Flopping
Gold and other precious metals are rising in great part because the Fed might backtrack on its promise to raise rates higher. The markets seem to be putting a premium on speculation and betting on the now predictable flip-flopping on part of the Fed, instead of betting on the promises that Trump has kept so far. It seems like investors can’t stomach a president who keeps a promise and prefer to put their money on an organization known for raising market expectations with vague statements and a lot of inaction.
Will Markets be Unstable for the next 4 years?
Despite this curious momentum swing, the fundamentals of the Bull Run are still strong. Trump is showing investors that he will deliver on his promises, so when it comes to investment in infrastructure and reining in the debt, he might also be able to deliver. This will not only force investors to recognize that reality is not as grim as they expected it to be, but it might also force the hand of the Fed. Investment in infrastructure has the potential to strengthen the US Dollar, so the Fed might be forced to actually raise rates as quickly as they expected to a few weeks ago. Gold prices and those of other precious metals, should subside then, ushering in a prolonged Bull Run in the market, with US companies selling more goods and services to keep up with the demand that those new infrastructure projects will create.
