Gold Asset Class Is Top Trump

March 3, 2016 1:15 pm

Gold is Top Trump

A year or so ago I couldn’t have called it. I might have had the quandary at the back of my mind but now it seems more and more likely: Trump is going to be the next Republican Presidential candidate. I wish I was a gambling man, I should have put a bet on it. The caucuses have proved that the Trump phenomena isn’t a foible in the American political mind-set, it is a reaction to world instability and the growing realisation that America’s power has lessened. It is also in part a reaction to the over exposure America has had to the global economy and the currency wars that are being played out from the EU to Asia. It isn’t exclusively just these reasons of course, the political genus won’t all be looking at it from the macro-economic level, but I have been surprised to read in the Washington Post that there are members of the Middle-class who are voting for Trump.
This shock only comes from the well-documented statistics that his majority of votes comes from his self-confessed “poorly-educated”, those without college education. Why therefore is this occurring and where does gold come into this?

Trump is the best asset class this year (other than Hilary), he is a direct development of discontent formed because of the establishment and the
status quo. He is a celebrity of sorts and that helps with his publicity but his appeal is that he is not part of the establishment.

Gold/Trump best asset

Gold/Trump best asset

He is, much like gold, the asset with a negative correlation matrix: when things go badly he/gold does well. Gold this year has gone up £157.22/$169.25/€159.18 – in sterling that is 21.68%. In real terms, if you had bought a kilo bar on Jan 4th and sold it based on the LBMA fix price (minus the premiums), you would have made £5,054.62 profit.

Gold is benefiting from all the uncertainty that is unfolding this year. Much like Trump, it is riding a wave of speculation that the establishment (mainly the Banks) have not dealt with the issues that caused recession last time. The fear that recession is round the corner is a genuine concern and the inflated equities have already had a correction following multiple counts of low profit announcements made by businesses. Likewise the Chinese economy is no longer heaving with production and is slowing down – I for one am watching the so called BRIC countries waiting for the next couple of announcements – I strongly suspect larger ripples will be coming.

Gold is the anti-establishment asset class. They will try to suppress it and are quick to write it off – but the reality is that it is being bought into and voted for by those who condemn it. It is a product of its surroundings and we wouldn’t have to have it if it wasn’t for the defective financial sector that keeps us grinding to a halt.

Verdict:- Gold is sitting pretty at the moment. I still think there is more uncertainty to come out and I haven’t mentioned Brexit which is only going to cause more riskiness. Gold for the most part reflects fact in its pricing – it is a mirror of economic uncertainty. As for Trump – he is a mirror of a cracked political system – he may even shatter it. Bad luck for seven years?

Article by Michael Cooper
email:-Michael Cooper


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