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USAGOLD/Peter Grant/05-12-17
Gold heads into the weekend on a little firmer footing. The upper end of Tuesday’s range was exceeded in earlier trading, but the yellow metal has been unable to prosecute a test of Monday’s high for the week thus far. Gold appears poised to close little-changed on the week.
While geopolitical tensions with North Korea and Syria/Russia have slipped from the headlines, they do in fact remain elevated. North Korea continues to advance its nuclear program and there is considerable uncertainty about how President Trump might react if there is either a nuclear test or another missile test.
The firing of FBI director James Comey is the latest distraction within the beltway, providing yet another headwind to the Trump agenda. While healthcare reform narrowly passed the House last week, initial Senate talks have been categorized as a “disaster” thus far by one insider. It looks like healthcare is going to remain contentious and time consuming.
This raises serious questions about the broader reflation agenda and the budget, once the short-term deal reached at the end of April expires in September. At that point, there is a chance that fiscal conservatives will demand a balanced budget component. And then of course, there will be the debt ceiling to contend with.
Commerce Secretary Wilbur Ross has already conceded that 3% “is certainly not achievable this year.” In the face of continued anemic growth, anticipated Fed policy adjustments going into H2 become increasingly clouded.
Amid broad and persistent uncertainty, it is imperative to maintain a well diversified portfolio. It is proven that such a portfolio with a gold component performs better overall. The lower gold price that has emerged over the past couple weeks may prove to be an excellent opportunity to make necessary portfolio adjustments.
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