The Alchemist/Dr. Jonathan Butler, Mitsubishi/5-10-2017
“After the dollar and stock market euphoria of late 2016 and early 2017, there are already signs that the Trump reflation trade may be more an expression of hopeful sentiment rather than a new paradigm of actual higher economic growth and inflation. Treasury yields, the dollar, equity valuations and inflation expectations are all reversing their previous gains, to the benefit of gold. Though it remains too early to say with any certainty, bullion may even end up benefiting further from the Trump administration’s changes to the regulatory environment and the promotion of US manufacturing. As Trumponomics, in whatever form it ultimately takes, brings a new set of political, economic and trade uncertainties over the coming four years, gold should have plenty of opportunities to shine as a safe-haven asset and portfolio diversifier.”
MK note: Somehow this argument seems considerably more credible now than 24-hours ago. The quote above leaves out another important argument made several times in this Alchemist article. The Trump administration is likely to have a great deal of difficulty pushing its programs through Congress, a direct blow to the Trump reflation trade. Slowly, sentiment is beginning to turn from the post-election euphoria that has governed trading in financial markets since the November election.
