Gold prices continued to shine this week reaching $1,244.70 per ounce and and has posted gains in five of the last six weeks. This week it reached a new three-month high â it’s highest since the Trump win and has climbed over 6% this year, beating the gains made in the same period in 2016.
The yellow metal has climbed 4.30% in the US dollar, 3.38% in the Euro and 1.35% in the sterling, in the last 30 days. This week gold is marginally higher in dollars and pounds but 1.5% higher in euro terms after the euro weakened on concerns of contagion due to the unresolved issues with Greece and other so called âPIIGSâ nations and their still vulnerable banks and economies.
This performance has surprised many commentators and analysts as gold’s three month high has come at a time when stock prices are also breaking records.
When we are asked in years to come what we learnt from the Trump administration, the first thing that will come to mind is ‘Rules no longer applied.’
Whether you are for or against Trump, there is no denying that the rule book of what elected politicians should and should not do has been wholly torn to pieces and thrown out the window.
For starters, Trump appears to expect to be busy during his first 100 days putting in place exactly what he promised he would do, during his election campaign. This is almost unheard of. As Frank Holmes writes, the media took Trump literally but not seriously, his supporters took him seriously but not literally. The outcome of these expectations are showing themselves.
We take a brief look at what has driven gold this week and ask what the end of Trump’s honeymoon means for the gold price.
Strong stocksâ¦strong dollar?
This week the gold price hit a three-month high and has surged over 7.5% so far this year. As we have shown in recent weeks, January saw gold post its biggest monthly gains since June 2016 (see table below) when surprise and uncertainty surrounding Brexit was driving the markets.
It may come as a surprise to some, but we are not just seeing reactions to everything that comes out of Trump’s mouth, office and Twitter feed at the moment. (Soon people will begin to realise that not every tweet can be seen as some kind of constitutional crisis). Attentions are beginning to refocus on the implications of what Trump may or may not succeed in doing, the wider US economy and, of course, what is happening elsewhere.
The gold price is being pushed upwards not only by the uncertainty surrounding Trump’s economic, foreign and domestic policies, a more dovish Fed, the growing populist movement in Europe, ongoing currency printing and debasement by central banks, growing inflation and the strength of the US dollar.
It is not just in Trump’s case that conventional rules no longer apply, they also appear to have been thrown out the window for precious metals in these first few weeks of 2017, namely that a strong US stock market means weak gold. Instead apparently strong economies, a record breaking stock market and recent highs for gold all seem to be able to exist in one realm of reality.
But this is a feat unlikely to last in the long-run, which only appears to be good for gold. As Frank Holmes points out in a recent piece, the rally on Wall Street is beginning to slow-down and investors are turning to gold.
Investors turn to gold at end of the honeymoon
Earlier this week we wrote about how you should really buy your loved one real gold  this Valentine’s Day, by setting up a GoldSaver account, rather than waste money on the usual jewellery, chocolates and flowers.
As Frank Holmes explains it seems gold is also what we should turn to when the love affair is over, which is exactly what institutional investors are doing as the rose-tinted glasses and honeymoon with Trump disappears.
As we mentioned last week, the World Gold Council’s report for 2016 showed that gold demand climbed to it’s