rounded corner
rounded corner
top border

Trump Fed and Gold


Bookmark and Share
President Trump will reshape the Federal Reserve. What does it mean for the gold market?

There are currently two big unknowns widely discussed by the financial analysts and investors. The first one are the prospects of tax reform. This week all eyes are on Capitol Hill, as the Senate is expected to vote on the tax bill. If the reform does not pass, the risky asset will decline, while gold will shine. But if the bill passes, we could see a return of the so-called Trump trade, which could be negative for the gold market.

The second big question mark is the future stance of the Fed. After Yellens resignation from the Board of Governors (she could stay on the Board, even if dismissed as the Chair) the number of vacancies among the seven top board members is now four. It means that Trump could significantly reshape the composition of the Fed. According toMark Grant , it means a more dovish stance, as Trump is focused on economic growth and higher interest rates clearly hamper economic activity.

We dare to disagree. First, Powell declared several times his attachment to the policy of gradual tightening. Second, inflation is likely to increase next year. Look at the oil prices.

Third, Trump has to nominate candidates likely to be accepted by the Republican-controlled Congress. Although the Republicans like economic growth (who does not?), they are afraid of inflation. Hence, they are not likely to support excessively dovish candidates.

Fourth, it is far from being clear that gradual hikes are detrimental to economic growth. Actually, the financial conditions are still very loose, or even easier than before the start of the currenttightening cycle .

Last but not least, there will also be rotation among the regional Fed presidents in 2018. Neel Kashkari, the most radical dove, will drop out of the voting group. Charles Evans, also considered a dove, will also cease to vote next year.

We will analyze the next years FOMC composition in detail in the December edition of theMarket Overview . Here we would like to just point out that the Trump Fed does not have to be dovish and refrain from the policy of gradual tightening. It may be the case surely, with four vacancies at the Board almost everything is possible. However, we rather expect a bit more hawkish FOMC in the future, which is not good news for the gold market. But the shift will not be immediate, as it takes some time to fill the vacancies. And without some convincing evidence of the pickup in inflation, there might be a short pause in interest rate hikes, indeed. 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.

Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.

Thank you.

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


Recent articles from this author



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.

Published by Barchart
Home  •  Charts & Quotes  •  Commentary  •  Authors  •  Education  •  Broker Search  •  Trading Tools  •  Help  •  Contact  •  Advertise With Us  •  Commodities
Markets: Currencies  •   Energies  •   Financials  •   Grains  •   Indices  •   Meats  •   Metals  •   Softs

The information contained on InsideFutures.com is believed to be accurate but is not guaranteed. Market data is furnished on an exchange delayed basis by Barchart.com. Data transmission or omissions shall not be made the basis for any claim, demand or cause for action. No information on the site, nor any opinion expressed, constitutes a solicitation of the purchase or sale of any futures or options contracts. InsideFutures.com is not a broker, nor does it have an affiliation with any broker.


Copyright ©2005-2018 InsideFutures.com, a Barchart.com product. All rights reserved.

About Us  •   Sitemap  •   Terms of Use  •   Privacy Policy