Gold Prices and the 'Second Coming' of Donald Trump
Monday, 12/18/2023 18:24
What rough beast slouches towards the opinion pages...?
SO if the 2024 U.S. ELECTION comes down to Trump versus Biden next November, then Trump will win,
says Adrian Ash at BullionVault in this report first sent to clients reading the Weekly Update email on Monday 11 December.
Apparently some people need an opinion poll to tell them that.
"President Biden's political standing is at its weakest point of his presidency," says the
Wall Street Journal, reporting a new survey...
"...with voters giving him his lowest job-performance marks and favoring Donald Trump 47% to 43% in
a head-to-head test of the likely 2024 presidential matchup."
Given our focus here at BullionVault, what might Trump's second coming do to the gold price?
"If Trump is perceived to have an improved probability of winning the Presidential race, that is
likely to be supportive of gold prices," says one analyst...
...blah-blahing to the news-wires back in September 2016, two months before The Donald's first win for the Republican Party.
Come that November,
gold prices "surged higher in light of a possible Trump victory" because "risk aversion has risen noticeably" said a Swiss refiner and a German bank in their client notes as the 2016 election drew near.
Then, the day before the result, "It looks like the market is [now] overwhelmingly pricing in a [Democrat] Clinton victory," said another analyst,
"weighing on gold prices".
Oh yeah?
Gold leapt on the day of Trump's victory in November 2016...
...adding $75 per ounce as the result became clear.
"[This echoes the UK's] Brexit referendum at the end of June," said yet another pundit, "when gold surged by nearly 10% within just a few days after the vote."
But bigger picture, that jump was a feint, a fake-out, a mere spike within
gold's then-ongoing downwards trading trend.
And even though Trump was going to prove dreadful for America and for the entire world according to pretty much every financial expert and political pundit, the price of gold in fact sank $200 from that top over the following 2 weeks...
...while the US stock market kick-started a 2-year run of new all-time highs.
Poor old gold wouldn't top its 2016 high until mid-2019. By then, the S&P500 index had risen by more than 36% from the day of Trump's victory.
So if we're going to get a repeat at the 2024 election, is now the time to cut gold, buy stocks?
US customers of BullionVault certainly eased off gold during Trump's first term, with the number of buyers down 10% in 2017-2019 compared to the prior 3 years as the number of sellers rose by that same percentage.
North American
gold ETFs also saw less demand, almost halving the rate of growth in 2017-2018 compared with 2015-2016. But most dramatic by far was the reaction of US gold-coin buyers.
With a Republican in the White House – the
gold-loving Donald Trump, no less, if not
the Golden Toilet artwork the Guggenheim in New York offered him on loan – who needed to hoard and hide so much yellow, shiny stuff at home anymore?
Firearms also saw US sales sink during Trump's first term. Indeed, the maker of Smith & Wesson guns declared bankruptcy in 2019...
...thanks in part to
the massive debts it got lumped with by a leveraged buy-out 10 years before...
...but also because, again, there was a Republican in the White House. So there was little-to-zero risk of anyone restricting Americans' right to bear arms. So there was
less rush to stockpile guns and ammo for fear of the Democrats trying to take them off you.
Covid flipped that trend in 2020, but the surge in Smith & Wesson's sales then
accelerated a further 67% in 2021 after Biden took over from Trump.
So will fear and insecurity ease back if Trump wins the White House again? Not according to the consensus financial view.
"If you think Trump 1.0 was wild, wait 'til you see Trump 2.0," said a macro-economist I heard speak at a seminar here in London earlier this month. By his own account, Trump will up-end the West's support for Ukraine, effectively gifting victory to Russia. He will up-end world trade too, by imposing US import tariffs on stuff from everywhere – 100% of goods – rather than 'only' on the 30% which comes from China.
That scenario does not, by itself, mean gold or the other precious metals would rise. And while geopolitical tensions, plus
US tariffs hitting international trade, don't sound good for Western stock markets, that's what pretty much everyone thought of Trump's tactics the first time around.
What if he doesn't get to run? What if Trump is blocked by the multiple fraud cases he's now fighting over his personal business affairs, or jailed outright for stoking the January 6th storming of the Capitol in 2021?
"There
will be riots, the country will burn," reckons former Fox New anchor and Republican media favourite Megyn Kelly. Or put another way...
"Things fall apart; the centre cannot hold;
"Mere anarchy is loosed upon the world..."
This poem, W.B.Yeats' 'The Second Coming', was quoted by Irish economist David McWilliams at
the LBMA annual conference this October.
Yeats' gloom seemed very apt given the horrors in Israel, the misery in Gaza, the continued suffering and slaughter in Ukraine, and the risk of worsening conflict and political deaths worldwide in 2024.
But then
'The Second Coming' – written in 1919 as the horrors of WW1 were followed by the deadly 'Spanish flu' pandemic –
also seemed very apt when McWilliams quoted it to discuss the social and economic impact of Covid back in 2020...
...and it seemed all-too apt 4 years before that, when the possibility of Trump becoming US President for the first time sent journalists, pundits and analysts rushing to find something scary to say about it.
"Yeats' poem experienced a huge revival in 2016," says literary critic Michiko Kakutani's book
The Death of Truth, lamenting Trump (as well as Brexit, populism and pretty much everything else) a couple of years later, midway through his first term.
"It was quoted in news articles
more in the first half of that year than it had been in three decades."
Here on the cusp of 2024, we already know what kind of "rough beast" might be "slouching" towards the White House for a second time next year. And while we might want to question the consensus view that Trump will prove simply terrible for the economy, we should most likely expect a new revival for Yeats' gloomy old verse as a result.
"The more quotable Yeats seems to commentators and politicians," says Irish writer Fintan O'Toole, "the
worse things are." Or maybe things just seem worse to the type of
people who like to quote gloomy poems as a shortcut to making some kind of point.
Surely some revelation is at hand even as this rough beast troubles our sight as it bothers the opinion pages yet again.
"A shape with lion body and the head of a man,
"A gaze blank and pitiless as the sun..."
No mention of
a luscious wig or having
small hands. But as things stand so far in the 2020s, it's becoming increasingly hard to say that gold doesn't love bad news.
So what might 2024 bring? With gold now back above $2000 and silver at $24 per Troy ounce, how gloomy (or not) will it prove to your personal finances?
Read the
2024 gold and silver price forecasts from investors choosing to use BullionVault now.
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