Investors Still See Gold as Safe Haven & Inflation Hedge

Investors Still See Gold as Safe Haven & Inflation Hedge

Investors Still See Gold as Safe Haven & Inflation Hedge

$GLD

In a counter intuitive move, the precious Yellow metal is advancing as Fed threatens to tighten, ETF investors have turned buyers as Trump Rally extends.

Savvy market analysts know very well that works for Gold in practice does not work in theory very often, in fact “rarely”.

The last 3 FOMC interest-rate increases that should have been negative Gold have actually driven prices North in the months that followed.

Gold is up about 7% since the Fed raised rates on 14 December 2016, it is + 13% in the 2 months following the last increase in December 2015 and 6% since June 2006.

One of the Key drivers is Donald Trump’s Presidency, as some uncertainties surrounding his administration have dominated markets since the 8 November election.

Precious metals dove initially as did the DJIA (the DJIA recovered fast, as did Gold) as investors noted Donald Trump’s vow to supercharge the economy with infrastructure spending.

If the conventional wisdom would have held true, that would have raise returns on equities, and curb interest in safe-havens like Gold.

But, during President Trump’s time in office we have seen the stock markets rise to record highs, and Gold rise with it. The Fed’s rate increase in December once again became a low mark for Gold, and expectations for further increases by the bank have failed to stop the price gains in the precious Yellow metal.

Investors in NYSEArca:GLD, the largest exchange-traded fund backed by Gold,  have bought more than 40 tones so far this month, helping to boost prices 6.8% YTD 1,235.25 oz.

Note: there were seasonal gains in the run up to Lunar New Year in January when the Chinese purchased physical Gold as gifts.

This action signals that big fund managers getting into the market.

At least one such manager has gone public; Stan Druckenmiller said this month he was a buyer of Gold in December and January because of the lack of clarity on US government policy.

There are several other reasons for investors seek a safe-haven from political uncertainties.

Elections in Germany, The Netherlands and Italy are coming soon, as Britain is setting out to begin toe discuss the terms of its departure from the EU, that will take about 2 years..

In France, National Front leader Marine Le Pen suggested she will take back control of the central bank and print money to finance welfare as she leads France out of the single currency bloc. of course, that assumes she wins the nation’s Presidential election, she just may give the French a reason to go to the polls and vote again.

HeffX-LTN Analysis for GLD: Overall Short Intermediate Long
Bullish (0.27) Bullish (0.25) Bullish (0.29) Bullish (0.28)

Have a terrific week.

 

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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