USAGOLD/Peter Grant/04-13-17
Gold is consolidating the latest round of gains before the long holiday weekend. U.S., UK and most European markets are closed tomorrow in observance of Good Friday.
Both gold and silver legged higher yesterday, boosted by a falling dollar after President Trump once again expressed some concerns about dollar strength in an interview with The Wall Street Journal.
If Trump wants a weaker dollar, he has a pretty easy remedy at hand. There were two vacant Fed Board of Governor positions when Trump took office in January. A third position opened up with the resignation of Daniel Tarullo in February.
President Trump could appoint “doves” — those that favor more accommodative monetary policies — to these open positions, shifting the overall bias of the central bank. “I do like a low-interest rate policy, I have to be honest with you,” Trump told The Wall Street Journal. His appointment would likely be in line with that bias.
Mr. Trump also seems to be walking-back expectations that Janet Yellen will not be invited to stay on as Fed chair when her term expires on January 31, 2018. “I like her, I respect her,” said Trump. During his campaign he had said, “I would most likely replace her because of the fact that I think it would be appropriate.”
Why the change of heart with regard to Yellen and more general monetary policy? I think there is probably a growing realization in the President that given our massive debt burden and his goal of achieving 4% growth, tighter policy and the dollar strength that comes along with it, are counterproductive.
This is something that seemed incredibly obvious from the very beginning: Trump’s tax cut and spend policies could never really work in a tighter monetary policy environment.
A MarketWatch headline this morning proclaims: Why did Trump flip flop on Yellen? She may be the dove he needs. Precicely! And I think several more doves on the Board of Governors would give Yellen the cover she needs to revert to her true-self . . . an unabashed dove.
I think in several months we’ll be looking back on Trump’s interview with the WSJ as a watershed moment; where the administration indicated that it was moving toward syncing its fiscal plans with monetary policy. This is bullish for gold and silver, and could be very bullish if they are successful.
