The pace of global economic recovery since the Great Recession ended in 2009 has been slow, with
cyclical inflation low. There was a speedy interval from mid - 2009 and running into 2011, which
was when gold, freakishly, entered a price bubble. The subsequent blowout came to rest at the end
2015, when the gold price had fallen down a little below the all in cost of producing an ounce of
the stuff. GLD Weekly
The economy started to regain some growth momentum in 2016 as did inflation and the gold
price, although highly volatile, has trended higher off its post bubble low. Bottom line, gold has
advanced at a muted pace since the low as it should given dollar stability and a still modest set
of economic expansion and inflation data. From a technical perspective, gold is in rather neutral
territory in terms of oversold / overbought and its premium or discount to its 40 wk m/a. In fact,
the metal is about to tackle its flat 40 wk average presently. Failure to break above the "40" would
be a negative.
Speculation about a Trump pro - business policy in favor of faster growth (and more inflation)
has eased greatly in recent weeks as markets players reassess the programs' outlines in terms of
whether they are doable from a political perspective. There is more intensive questioning about this
issue, but the towel has yet to flutter over the ropes by any means. The USD rallied nicely after
the election, but has drifted lower recently, and is in the process of testing its 40 wk m/a, but
to the downside. If sentiment in the markets again begins to favor the Trump stimulus plans,
the dollar could rally and this might put some short term downward pressure on gold as players
buy stocks instead. If sentiment about Trump's ability to get his way weakens further, the dollar
could come down more and gold would likely be favored. $USD Weekly
The economy could well slow down some time later this year as could inflation pressure.
Everything equal, that could lead to a trading range for gold. If the Trump plan passes muster,
that will help gold down the road as would a nasty turn in US - China trade policy which may
also hit the Trump docket.
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!