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Powell's Nomination and Gold

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Yesterday, Trump nominated Powell as Fed Chair. What does it imply for the gold market?

On Thursday, president Donald Trump has finally ended weeks of speculations andnamed Jerome Powell as his pick to lead the Federal Reserve. I am confident that with Jay as a wise steward of the Federal Reserve, it will have the leadership it needs in the years to come, said Trump during the announcement in Washington. His choice was largely expected, so gold saw little reaction after the nomination (at 1900 GMT), as the chart below shows. This is what we predicted in the latest edition of theMarket Overview , writing that he leads the polls, so that choice would not surprise the market.

Chart 1: Gold prices over the last three days.
 Gold prices over the last three days

How would his nomination impact the gold market? Well, Powell has been always in line with Yellen, so his choice implies a keeping of the status quo. Powell is, thus, likely to continue the Feds current policy of gradually rising interest rates. The only difference between him and Yellen (except political views) is that Powell seems to be more eager to support financial deregulation. Financial deregulation would not be supportive for the gold prices, as it could boost the risk appetite and positive sentiment toward financial sector.

On the other hand, Powell lacks the deep background in economics (he has no degree in economics instead, he is a lawyer). Hence, the risk of a policy mistake is perhaps slightly higher under Powells leadership than under Yellens. However, gold bulls should not count on that Powell may err in either direction. And degrees in economics did not help Greenspan and Bernanke to avoid theGreat Recession .

Anyway, investors should not forget that Trump will have the opportunity to reshape the Fed even further. There are three more open seats on the board of governors (if Yellen steps down from the board, there will be four vacancies). In particular, John Taylor may join the Fed, as heleads the polls for the next Fed Vice Chair. Hence, Powells nomination is not the end of speculation about the future stance of the U.S. central bank. We believe that the Fed would be slightly more hawkish after all the personal changes, which should not be positive for the yellow metal.

And investors should also remember that whoever is the Fed chair, the U.S. economy is doing relatively well. Hence, the macroeconomic outlook is not very supportive for the gold prices right now. Stay tuned!

If you enjoyed the above analysis, we invite you to check out our other services. We focus on fundamental analysis in our monthly Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. If youre not ready to subscribe yet and are not on our mailing list yet, we urge you tojoin our gold newsletter today . Its free and if you dont like it, you can easily unsubscribe.

Thank you.

Arkadiusz Sieron, Ph.D.
Sunshine Profits Gold News Monitor and Market Overview Editor

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About the author

Arkadiusz Sieron is a certified Investment Adviser. He is a long-time precious metals market enthusiast, currently a Ph.D. candidate, dissertation on the redistributive effects of monetary inflation (Cantillon effects). Arkadiusz is a free market advocate who believes in the power of peaceful and voluntary cooperation of people. He is an economist and board member at the Polish Mises Institute think tank. He is also a Laureate of the 6th International Vernon Smith Prize. Arkadiusz is the author of Sunshine Profits’ monthly Market Overview report and daily Gold News Monitors, in which he keeps subscribers up-to-date regarding key fundamental developments affecting the gold market and helps them prepare for the major changes.

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