Although it may not “feel” like it, the price of gold has been in a nice – albeit “controlled” – uptrend since late December (1-year daily, Comex continuous futures contract):
Gold is up over 12% since 12/22/16. By comparison, the S&P 500 is up 7% and the Dow Jones Industrials index is up 6%. Apple Inc (NASDAQ:AAPL) is responsible for 13% of the S&P 500 move higher and 25% of the Dow move higher. The primary drivers of gold besides elevated geopolitical risk are the expectation of an easing of monetary policy and the fall in value of the U.S. dollar:
While I don’t think the effort will yield any success, the only way the Trump Government can stimulate economic growth other than by printing another few trillion and distributing it across the population, is to attempt to stimulate the demand for U.S. exports globally by devaluing the dollar vs. the currencies of our primary trading partners (Canada, Europe, China).
As with any form of Government intervention, this will further destabilize the U.S. financial system. That said, most other major industrialized countries (except for Russia) are devaluing their currency vs. global currencies in order to bolster their export industries.
After today’s employment report, in conjunction with the negative economic reports released earlier this week, it’s likely the Fed’s next policy shift ease monetary policy and further enable the expansion of credit. When this reality hits the market, the hedge fund algos will take gold and the mining stocks higher.