Yesterday, Trump held a long-awaited press conference. What does it imply for the gold market?
The long-awaitedis behind us. It was his first press conference since winning the presidential election. Markets expected some details on the economic agenda of the new administration. Unfortunately for them, the press conference was dominated by questions on potential connections between the president-elect and Russia and on potential conflicts of interest with his business. Trump did not provide the details of his economic plan in his briefing. Instead, he focused on hackers, relinquishing control of his business to his two adult sons, and attacking media which published fake news about an alleged dossier of unverified information about Trump owned by Russians.
Regarding the economy, the president-elect just said that he would bring companies back to the U.S, create many jobs, build a wall on the border with Mexico and also introduce a border tax. What was lacking were the details of his tax reform or fiscal stimulus – the most important elements that triggered a rally after he won the election. Therefore, markets were disappointed by the lack of important information. Hence, the U.S. dollar and real interest rates declined yesterday, while gold gained. Today, the price of the yellow metal jumped above $1,200 during Asian trading hours. Indeed, the uncertainty about the U.S. economic policy of the new administration is positive for the gold market and thus, the price of gold may increase further in the short term, since the president-elect failed to provide a fresh catalyst for the reflation trade. However, it is too early to trump the end of the Trump rally, especially that the reflation trade is not only about Trump’s fiscal policy. Stay tuned!
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Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.
Sunshine Profits‘ and Editor