By
Joe Foster
November 15, 2016
Surprising moves in the markets since the Trump victory haveweighed on gold. The markets are focused entirely on the potentially positiveimpact that tax cuts and infrastructure spending will have on the economy. As aresult, we have seen strength in the dollar, base metals, and the stock market,and selloffs in bonds, emerging markets, and gold.

Market moves in interest rates have given the FederalReserve ample headroom to increase rates in December. Markets are pricing inexpectations for strong GDP growth and normalization of interest rates, whileignoring the risks and unintended consequences of Trump’s policies.

These include:

1. Unbridledexpansion of the budget deficit, driving sovereign debt to (even more)dangerous levels.

2. In arising rate environment, the cost of government debt service would likelybecome overwhelming.

3. Risingrates could snuff out the weak growth that has characterized the post crisiseconomy.

4. Increasingprotectionism would likely create a drag on the global economy.

5. Immigrationplans that will likely be costly and difficult to implement.

6. Risingrates and a strong dollar would starve the struggling global economy of neededcapital.


Gold Price, November 2016

Source: Bloomberg


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