Wall Street Rises and Falls in Response to Trump
President Trump has a huge influence on the financial markets – Wall Street rises and falls in response to his actions. Trump’s influence on the Wall Street also extends into the global economic landscape and wise investors know the importance of keeping their eyes on the U.S. Presidency. In the buildup to the 2016 presidential election, many people had predicted that a Trump presidency would usher in a wave of economic and geopolitical uncertainty that could be bullish for gold.
Trump’s surprise victory at the polls changed all the forecasts about the U.S. economy and where gold prices are headed. For one, Wall Street warmed up to some of Trump’s proposed economic policies and stocks soared to record highs to leave gold in the dust. Now, gold is moving up again, this piece examines the bullish and bearish case for the yellow metal.
Here’s the bullish case for gold
The main driver of the uptrend in gold prices is the current crisis rocking Donald Trump’s presidency. The media both online and offline is rife with allegations that Trump might have asked FBI Director James Comey to end the ongoing investigation on the former National Security Adviser Michael Flynn. There are also reports that Trump might have passed on sensitive national intelligence to Russia.
Of course, Trump has denied the allegations and it is hard to separate the facts from the sensational activities of the media. Yet, the crisis is forcing investors to think twice about staying on the Trump rally. Jeffery Hogan an analyst at Saxon Trade submits that “investors understand that Trump would be forced to wait until the current crisis is resolved before making waves about his unconventional economic plans.” Hence, the potential delay in implementing Trump’s America-first policies has dampened the mood on Wall Street, stocks are down, and the USD has declined to its lowest level since November 2016.
Analysts have also noted that the uptrend potential for the yellow metal might be much higher if the current political climate in the U.S. continues to be volatile. For one, if there’s hard evidence of wrongdoing on Trump’s part, Trump might need to start playing it safe by canceling some his most controversial economic plans.
The weakness on Wall Street and the retreat of the USD in the global forex markets is proving to be positive for gold. The latest gold price forecasts indicate an impressive upside potential that could see the yellow metal breaking out above the $1,300 mark.
Here’s the bearish case gold
It is very easy to be fixated on the how gold is enjoying bullish tailwinds but the smart investor cannot afford to forget the fact that the uninspiring GDP growth expectations could dampen inflation risks. Of course, investors will have fewer reasons to seek refuge in gold if there are no inflationary trends in sight.
More so, U.S. monetary policy could also dampen the optimism on gold prospects. The growth prospects of the U.S. economy are currently lukewarm but there’s no telling the unexpected chain of events that could brighten the economic outlook. If the fed decides to raise interest rates in its next policy meeting, you can reasonably expect gold to lose its shine.