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 SPX is up 7% and the Dow Jones Industrials index is up 6%. AAPL is responsible for 13% of the SPX 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.
The above analysis is an excerpt from the latest issue of the Mining Stock Journal. The stock featured in this issue is up over 4% today. Learn more about this newsletter here: MSJ Info.
A currency that appreciates improves consumer goods prices and, consequently, lowers future production costs while extending the chains of production. Manufacturing becomes sustainable when sound money is employed, so you are right; that form of stimulation only serves to short-circuit the economy in the long run. What makes the situation more precarious is that despite trillions of new liquidity being pumped for years, there hasn’t been any appreciable boost in exports from the U.S.; if anything, the deficit has widened, meaning that we’re not far from living like cavemen if we keep delaying the necessary correction that is to come.