‘America First’, the US Dollar and Gold
A pillar of Donald Trump’s presidential campaign, and now policy formation, is “America First”
So far, this has entailed withdrawing from possible participation in the Trans-Pacific Partnership (TPP), citing potential currency manipulators, and construction of The Wall along the Mexican border.
A Key outcome for investors will be the direction of USD, the world’s reserve currency, billions of dollars in transactions are settled in USD every day, including for most commodities.
Prior to Donald Trump taking office, prominent investors and analysts were calling for continuation of USS strength based on tighter monetary policy and stronger economic growth. But, recently USD has weakened amid realization the America First policy touted by Trump may not be USD positive.
Gold rallied 9% during this frame.
By nature investors place more emphasis on what happened recently instead of taking a broader view. The USS has been in a major Bull market against most currencies since Y 2011. This has also occurred roughly in line with Gold’s decline from 1,900 to 1,050 oz. in December 2015.
The Big Q: Are the actions being taken by the Trump Administration to spur domestic manufacturing, jobs and economic output a precursor to a weaker dollar and another Bull market in Gold?
The Big A: Time will tell, but investors should keep close watch on this developing scenario and adjust portfolios accordingly.