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Is Donald Trump good for gold? How the president impacts the market

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Is Donald Trump good for gold? How the president impacts the market

Fool’s gold or the Midas touch? Opinions on Donald Trump differ, depending on who you ask. But one thing we can agree on is that his power is felt across the world – and the gold market is no exception. Since he was elected President of the United States in November 2016, Trump has sent waves through the US economy and beyond, and the price of gold has risen and fallen in response.

So, what does this mean for those who have a stake in the gold market, whether that be trading it or simply buying gold coins and bars?

From the fluctuating value of the US dollar to the trade wars between America and other countries we’ve looked at the way the markets have responded to the Trump administration and the impact this could have on gold prices for investors over the long term.

How does President Trump impact the price of gold?

There are a variety of factors that play into the price of gold, many of which Trump has an impact on, both directly through the policies he implements or indirectly through things like Tweets and speeches that express his position on world issues.

The main elements that tie into gold prices include:

  • The US dollar

Gold prices are strongly linked to the US dollar. Historical trends show that when USD is strong, gold tends to be weaker, while a weaker dollar typically causes an increase in gold prices. Generally, Trump has had a positive impact on the value of the US dollar, which usually lowers the gold price. However, his turbulent comments and decisions also trigger regular fluctuations in USD, which subsequently affects the price of gold.

  • Interest rates and savings

High interest rates make gold a less attractive investment, as, unlike other investments, it doesn’t offer interest.A higher interest rate means people are more likely to save, as they get greater returns. As such, the higher the interest rate, the more ‘expensive’ it is to invest in gold because people are missing out the money they’d make investing elsewhere.

When the interest rate is increased by the US Federal Reserve, gold prices tend to dip. Trump’s announcements and opinions on USD interest rates also tend to have an impact on gold prices.

  • Inflation

Closely tied to interest rates, inflation has an impact on the price of gold. Higher expectations for inflation can motivate people to invest in gold, while lower expectations for inflation (which is often tied to rising interest rates) may cause a decrease in demand. The sentiment surrounding inflation in Trump’s economy will have a direct impact on gold prices, as will his comments about the likelihood of an increase or decrease.

  • Global markets

Gold prices are affected by Trump’s relations with other world leaders andAmerica’s decisions surrounding world issues such as trade and tariffs. The relationship between Trump’s international relations and the price of gold is largely due to the fact USD is the de facto currency of the world, and therefore impacts global economies.

The outcome of global summits and meetings between the president and other politicians can influence the strength of USD, which in turn will impact the price of gold, depending on how much faith investors have in the US economy.

Trump and gold: The story so far

Gold prices soar in times of uncertainty, which is why many people expected the gold price to fall once Trump was elected. While this did happen initially, Trump’s victory has also triggered plenty of change for the US, which tends to equate to more uncertainty. Throughout his presidency, Trump has proved to be a controversial character, and (as the charts below indicate) we’ve seen movement in gold prices reflect this.

 

Figure 1: The price of gold November 2016-July 2018 (source: CoinInvest)

Figure 1: The price of gold November 2016-July 2018 (source: CoinInvest)

 

Figure 2: US Dollar index November 2016-August 2018 (source: Trading Economics)

Figure 2: US Dollar index November 2016-August 2018 (source: Trading Economics)

  • November 2016: The gold price went down as USD strengthened, which is partly attributed to general faith in the US economy after Trump’s victory speech.
  • March 2017:There was a spike in gold prices after the G20 summit when the dollar fell following trade talks.
  • Mid-may 2017: After declining gradually, the price of gold rose again after damning reports surfaced in the media, indicating members of Trump’s administration had met with Russian officials.
  • July 2017:Positive employment figures out of the US boosted the dollar, causing gold prices to drop.
  • September 2017: The price of gold spiked after speculation that the US Federal Reserve wouldn’t approve an interest rate rise. However, it fell when it was confirmed that rates would in fact rise and Trump’s tax plan was published.
  • December 2017: Gold prices fell as the interest rate increase came into place, but climbed again throughout the month as USD weakened.
  • March 2018: The price of gold rose after Trump announced intentions to place trade tariffs on aluminium and steel coming out of China, causing widespread uncertainty across Europe, Canada, and Mexico about what other tariffs would be implemented.
  • May 2018: Trump cancelled his North Korean summit, triggering a steep rise in gold prices alongside uncertainty about future relations between the countries.
  • Mid-July 2018:Trump criticised the US Federal Reserve for raising interest rates, causing the dollar to weaken and gold prices to climb.
  • End of July 2018: Gold weakened after the dollar grew stronger following Trump and European Commission chief Jean-Claude Juncker’s announcement they intend to work together towards a deal to lower tariffs, causing US/EU trade tensions to ease.

After tracking current events and the fluctuating gold prices, there’s a clear link between Trump’s activities and the movement of the market.

Those wondering about investing in gold beneath the umbrella of the Trump administration should make a close study of the president’s calendar, looking for potential events that could impact the strength of the dollar, and, subsequently, the price of gold. These include meetings between world leaders, conferences and summits, US Federal Reserve announcements, and major speeches from the president.

USD, gold, and Trump going forward: What next?

As we can see from the timeline above, the US dollar is incredibly sensitive to Trump’s activities. Currently, USD is strong – however, current trade wars Trump has started with the EU, Canada, and China are offsetting this, slowing the decline of gold prices. While there seems to be some movement towards making an arrangement with the EU, there is still much uncertainty surrounding America’s trade relationship with Canada and Mexico.

With uncertainty being a key reason for strong gold prices, and Trump being a president that seems to trigger a lot of uncertainty, it could be that this style of government is exactly what gold prices need to thrive – after all,2017 was the best year for gold since 2010, as the weak dollar caused precious metal prices to rise.

While the dollar has recovered throughout 2018, there have been several instances where gold has seen a price hike, most of which are closely linked to Trump’s unexpected comments and activities.

Looking ahead, it could be that mid-term elections in November restore some sort of stability to the markets. However, if there’s one thing that has been consistent with this presidency, it’s that nothing is consistent – which means Donald Trump’s administration could be the perfect recipe foruncertainty, which we all know is exactly what the gold market craves.

Contributed by Daniel Marburger, Managing Director and Coininvest

Investing

Shares rise as cyclical stocks provide support; yields climb

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Shares rise as cyclical stocks provide support; yields climb 1

By Saqib Iqbal Ahmed

NEW YORK (Reuters) – A gauge of global equity markets snapped a 3-day losing streak to edge higher on Friday, as the recent selling pressure on high-flying big technology-related stocks eased even as investors showed a preference for economically sensitive cyclical sectors.

Oil prices fell from recent highs as Texas energy companies began preparations to restart oil and gas fields shuttered by freezing weather, while the U.S. Treasury yields extended their recent rise.

The MSCI’s global stock index was up 0.47% at 681.88, after losing ground for three consecutive sessions.

On Wall Street, stocks steadied as cyclical sectors edged higher while tech names made modest advances after concerns about elevated valuations led to some selling in recent sessions.

“What we saw (this week) represents a market that is tired and may not do very much. So we are headed for some sort of a pullback, but I don’t think we’re there just yet,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

“Investors are not really pulling out of the market, but they are becoming more cautious. It already has factored in another good positive earnings season.”

The Dow Jones Industrial Average rose 119.97 points, or 0.38%, to 31,613.31, the S&P 500 gained 12.93 points, or 0.33%, to 3,926.9 and the Nasdaq Composite added 92.58 points, or 0.67%, to 13,957.93.

The S&P 500 technology and communication services sectors, housing high-value growth stocks, were among the smallest gainers in early trading, while financials, industrials, energy and materials rose more than 1%.

European shares edged higher on Friday as an upbeat earnings report from Hermes boosted confidence in a broader economic recovery. The pan-European STOXX 600 index was 0.64% higher.

U.S. Treasury yields on the longer end of the curve rose to new one-year highs on Friday as improved risk appetite boosted Wall Street, while the yield on 30-year inflation-protected securities (TIPS) turned positive for the first time since June.

Core bond yields have pushed higher globally, led by the so-called reflation trade, where investors wager on a pick-up in growth and inflation. Growing momentum for coronavirus vaccine programs and hopes of massive fiscal spending under U.S. President Joe Biden have spurred reflation trades.

The benchmark 10-year yield was last up 5.1 basis points at 1.338%, its highest level since Feb. 26, 2020.

Oil prices retreated from recent highs for a second day on Friday as Texas energy companies began preparations to restart oil and gas fields shuttered by freezing weather.

Unusually cold weather in Texas and the Plains states curtailed up to 4 million barrels per day (bpd) of crude oil production and 21 billion cubic feet of natural gas, analysts estimated.

Brent crude futures were down 28 cents, or 0.44%, at $63.65 a barrel, while U.S. West Texas Intermediate (WTI) crude futures fell 66 cents, or 1.09%, to $59.86.

Copper jumped to its highest in more than nine years on Friday and towards a third straight weekly gain as tight supplies and bullish sentiment towards base metals continued after the Chinese New Year.

Spot gold XAU= was down 0.58% at $1,785.71 an ounce.

The dollar lost ground on Friday, extending Thursday’s decline as improved risk appetite sapped demand for the safe-haven currency and drew buyers to riskier, higher-yielding currencies. The dollar index was off 0.295%.

Bitcoin hit yet another record high on Friday, hitting a market capitalization of $1 trillion, blithely shrugging off analyst warnings that it is an “economic side show” and a poor hedge against a fall in stock prices.

(Reporting by Saqib Iqbal Ahmed; Editing by Nick Zieminski)

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Oil falls after surging past $65 on Texas freeze

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Oil falls after surging past $65 on Texas freeze 2

By Stephanie Kelly

NEW YORK (Reuters) – Oil prices fell on Thursday despite a sharp drop in U.S. crude inventories, as market participants took profits following days of buying spurred by a cold snap in the largest U.S. energy-producing state.

Brent crude fell 41 cents, or 0.6%, to settle at $63.93 a barrel. During the session it rose as high as $65.52, its highest since January 2020.

U.S. West Texas Intermediate (WTI) crude futures fell 62 cents, or 1%, to settle at $60.52 a barrel, after earlier reaching $62.26, the highest since January 2020.

Brent had gained for four straight sessions before Thursday, while WTI had risen for three.

“The market probably got a little bit ahead of itself,” said Phil Flynn, a senior analyst at Price Futures Group in Chicago. “But make no mistake, this selloff in oil doesn’t solve the problems. The problems are going to persist.”

Though some Texas households had power restored on Thursday, the state entered its sixth day of a cold freeze. It has grappled with refining outages and oil and gas shut-ins that rippled beyond its border into Mexico.

The weather has shut in about one-fifth of the nation’s refining capacity and closed oil and natural gas production across the state.

“The temporary outage will help to accelerate U.S. oil inventories down towards the five-year average quicker than expected,” SEB chief commodities analyst Bjarne Schieldrop said.

Prices dropped despite a decrease in U.S. oil inventories. Crude stockpiles fell by 7.3 million barrels in the week to Feb. 12, the Energy Information Administration said on Thursday, compared with analysts’ expectations for an decrease of 2.4 million barrels.

Crude exports rose to 3.9 million barrels per day, the highest since March, EIA said.

“The big nugget was the big jump in exports of crude oil,” said John Kilduff, partner at Again Capital in New York. “We’ll have to see what happens with that next week weather in Texas, but I have been looking for a pickup there for a while.”

Oil’s rally in recent months has also been supported by a tightening of global supplies, due largely to production cuts from the Organization of the Petroleum Exporting Countries (OPEC) and allied producers in the OPEC+ grouping, which includes Russia.

OPEC+ sources told Reuters the group’s producers are likely to ease curbs on supply after April given the recovery in prices.

(Additional reporting by Yuka Obayashi in Tokyo; editing by Emelia Sithole-Matarise, Steve Orlofsky, David Gregorio and Jonathan Oatis)

 

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GameStop frenzy sparks fresh investment in stock-trading apps

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GameStop frenzy sparks fresh investment in stock-trading apps 3

By Jane Lanhee Lee

OAKLAND, Calif. (Reuters) – The recent trading frenzy centered on GameStop Corp and other “meme” stocks is sparking a wave of investor interest in start-ups aiming to mimic the success of Robinhood Markets Inc, whose no-fee brokerage app has helped drive a trading boom.

Public.com, a direct competitor to Robinhood that boasts a host of blue-chip backers, said on Wednesday it had raised $220 million, valuing it at $1.2 billion on the private market. Another well-heeled rival, Stash, said earlier this month it had raised $125 million, while Webull Financial LLC, backed by Chinese investors, is also raising fresh funds after enjoying an influx of new users.

Robinhood, meanwhile, raised some $3.4 billion in the midst of the GameStop furor to assure its stability amid rapid growth and demands by its trading partners that it post more collateral.

The fresh investments are coming even as government regulators ramp up scrutiny of Robinhood and others involved in the GameStop trading. A U.S. congressional committee on Thursday grilled the chief executive of Robinhood and a YouTube streamer known as “Roaring Kitty,” among others, as it probes possible improprieties, including market manipulation.

Robinhood came under stiff criticism from some quarters for restricting trading in GameStop and other shares at the height of the frenzy, a move the company says it was forced to make due to requirements of partners that settle trades. It has also drawn scrutiny for a business model that relies on payments for sending trading business to partner brokerages, a practice Public.com and some other rivals are pledging to avoid.

Investors see rich opportunity in bringing easy stock trading to smartphone users globally, though the companies say they are also cognizant of the risks.

Stash, which doubled its active accounts to over 5 million by the end of last year, operates with only four trading windows a day to discourage rapid speculative trading, it said.

U.K.-based Freetrade.io told Reuters by email that its user numbers last year grew six-fold to 300,000 and by mid-February had reached 560,000. It said it had raised a total $35 million, including from crowd-funding rounds from over 10,000 customers.

But it does not offer margin trading or riskier offerings. “These products encourage investors to behave as if they are gambling or speculating rather than investing,” a Freetrade.io spokesman said.

Interest in trading apps is soaring globally. In Mexico, trading app Flink launched seven months ago and already has a million users, according to co-founder and chief executive Sergio Jimenez. He said Mexicans can buy fractions of U.S. stock through the platform, but not Mexican stocks – yet.

“Ninety percent of them are investing for the first time,” said Jimenez.

Flink raised $12 million in a funding round in February led by Accel, an early investor in Facebook. Accel is also an investor in Public.com and Berlin-based Trade Republic Bank Gmbh, which allows European retail investors to buy fractions of U.S. stocks, according to Accel partner Andrew Braccia.

“The bigger story here is there’s just this global trend of… accessibility,” he said.

Start-up investors also see opportunity in the infrastructure behind the trading apps. DriveWealth, which serves Mexico’s Flink and 70-plus other online trading apps around the world, has hundreds more partnerships in the pipeline, according to founder and chief executive Bob Cortright. DriveWealth provides the technology to power digital wallets and trading apps, and also provides clearing and brokerage service to its business partners.

“This is this is only beginning,” said Cortright. “The fact that you could have a smartphone in your hand in India, for instance, and buy $10 worth of Coca-Cola stock at an instant, that’s pretty game-changing.”

Venture capital investments in U.S. fintech companies hit a record last year with $20.6 billion invested, according to data firm PitchBook. Globally, around $41.4 billion was invested in fintech companies in 2020.

(Reporting By Jane Lanhee Lee in Oakland; Editing by Jonathan Weber and Dan Grebler)

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