Gecko Research gives its take on the U.S. Presidential Election and precious metals, and discusses the latest movements at Golden Arrow’s Chinchillas JV project in Argentina.
The Election and Precious Metals
We have received numerous emails with questions on what we think of the U.S. elections, Donald Trump, etc., and what impact the outcome might have on gold and macro economics in general. We are not a political letter and we are far away from being experts in the political area so we won’t go down that road too much. That said, although gold is priced in U.S. dollar, the price of gold is affected from what’s happening in the rest of the world as well, not just the U.S.
It was interesting to see base metals soar after Trump won, most likely due to the possible infrastructure improvements now facing the U.S. with Trump in charge. As for the precious metals, they were likely driven up by the Asian markets immediately after the election results were final. Shortly thereafter, the gold market had a nasty reversal which was likely fueled by a combination of things like a stronger dollar, market stops being triggered and perhaps even margin calls.
Trump might raise rates early on, the bond market is way ahead of him there, but we think he can only do so much. The more he raises the rates, the more expenditures and government deficits he has to deal with, especially since Trump has proclaimed a lot of spending rather than saving. This will only circle around to more monetary easing which makes us believe that no matter how you slice and dice this, gold will continue to do well. Add some inflation (expectasions) into the mix and a perfect precious metals storm is brewing.
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