Take Donald Trump’s impending deregulation, tax cuts and add a dash of protectionist trade deals and you get a recipe for a blustering market, which is uneasy and hard to gauge. We are in times of vast uncertainty, trying to navigate these uncharted waters is difficult, even for the most seasoned trader.
Traders are unsure of the Trump rally’s stamina. The uncertainty has caused investors to seek refuge in safe-haven commodities such as gold, which has soared 7% in 2017 in a rally dubbed the ‘’Trump-Hedge’’.
Investors are swaying between the Trump-infused bullish bets on US indices and the reliable cushion in times of uncertainty -- gold.
Europe Driven
The majority of the gold investments have been coming from Europe, where traders are more concerned with diversifying their portfolios. This is perhaps because of the uncertainties in Europe, starting with the Dutch elections in March, all the way to the impending Brexit negotiations. The fundamentals of Europe are being brought into question, unnerving investor’s confidence.
However, as Donald Trump’s presidency is still in its infancy, the US may have more reasons to be risk off, as Trump acts out his promises.
The introduction of the Dodd-Frank, which regulates financial institutions, deterred banks from trading in the commodity markets. Dismantling the Dodd-Frank will push American Banks back into the commodity market.
However, the Fed will likely raise rates an estimated 3-4 times this year, which could push the price of gold down.