May Donald Trump’s election put the brakes on gold’s rise?
In 2016, the Republican candidate’s victory within the US presidential election led to a €100 drop within the value of gold in euros, with the worth falling from €1,180 to €1,080 within the 4 weeks following the election:
This decline was then utterly erased firstly of 2017:
In the present day, an oz of gold is quoted at greater than two and a half instances its 2016 value.
Gold must endure a correction of €250 earlier than we may contemplate a decline corresponding to that of 2016:
This correction would deliver the gold value again to the extent it had reached in mid-September.
Gold’s correction in greenback phrases is extra pronounced, because the election end result advantages the buck within the brief time period.
As in 2016, Trump’s victory strengthened the greenback on expectations of speedy financial development, tax cuts and rate of interest rises, making US property extra engaging to buyers.
The DXY index has surged because the outcomes have been made official:
The greenback is behaving precisely because it did in 2016: rising in anticipation in October and hovering till the tip of the yr.
Will the greenback resume its ascent by the tip of the yr?
If that’s the case, this transfer would pose a short-term risk to gold.
Nevertheless, inside components are presently supporting the gold value and will finally forestall a correction just like that of 2016.
Within the month-to-month bulletin reserved for GoldBroker shoppers, I spotlight sustained investor demand in October: gold ETF outstandings soared final month. Even with charges and the greenback on the rise, gold’s efficiency in October was historic.
Gold closed at its highest quarterly and month-to-month nominal stage ever, up 4.15% within the final month alone:
Month-to-month and quarterly data for gold in euros are much more spectacular:
Gold has gained over €850 in simply 12 months!
Gold’s take-off a yr in the past was anticipated because of the chart evaluation detailed in my October 27, 2023 bulletin.
A yr in the past, I wrote: “gold, for its half, has simply drawn a really wonderful all-encompassing candle in weekly variation, bouncing off its 200-day transferring common. It is a bullish signal that can put much more stress on COMEX individuals defending the $2,000 threshold: these brief sellers should scramble to keep away from gold returning to its uptrend channel.”
In month-to-month variation, we’re seeing a big, all-encompassing candlestick. This kind of month-to-month bullish sign may be very uncommon for gold:
The final time such an all-encompassing candlestick appeared was in Might 1978, simply earlier than gold’s nice takeoff, following the break of the third high at $180, and after 4 lengthy years of consolidation between 1974 and 1978:
One yr later, we will contemplate that this encompassing candlestick was certainly a bullish sign, identical to the one in 1978 :
These ETF purchases are supporting the gold value, however the financial fundamentals are additionally very totally different from these of 2016.
US public debt now stands at $35 trillion, with $10 trillion to be refinanced over the subsequent 12 months, an quantity that has doubled in simply 4 years. The deficit has reached $2 trillion, whereas curiosity on the debt now quantities to $1 trillion – thrice greater than ten years in the past and twice as a lot as three years in the past. These repayments take in 20% of revenues, or $3 billion a day.
The speed hike seen instantly after Trump’s victory:
In 2016, 10-year yields had additionally reacted strongly to Trump’s victory earlier than stabilizing at round 2.2%:
In the present day, these similar charges now exceed 4.5%, and debt servicing is far heavier, with a major proportion of debt to be refinanced within the coming months.
The chart of the 10-year bond score is even breaking by means of a falling wedge in a strongly bearish configuration:
In 2016, this score had collapsed, however its worth was 40% increased than at this time…
A correction of this magnitude would have far-reaching repercussions for the fairness market, particularly small caps. The euphoria that adopted Trump’s victory on this section was primarily fueled by the promise of tax cuts. Nevertheless, the specter of an uncontrolled rise in rates of interest weighs much more closely on these corporations, which are sometimes closely indebted and face an more and more troublesome refinancing wall to beat.
No, the scenario will not be equivalent to that of 2016!
Trump is again in energy in a totally totally different context.
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The data contained on this article is for data functions solely and doesn’t represent funding recommendation or a advice to purchase or promote.