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Home>UPDATE: Trump's saber-rattling is the big reason you should own some gold

UPDATE: Trump's saber-rattling is the big reason you should own some gold

UPDATE: Trump's saber-rattling is the big reason you should own some gold

10/04/2017

By Howard Gold, MarketWatch

This president is gold bugs' best friend since Nixon

President Donald Trump has thrown gold's true believers a lifeline.

Trump's inflammatory statements and tweets on some of the most sensitive areas of foreign policy -- notably North Korea and Iran -- have raised risk dramatically on the international stage. And by that I mean the risk of war, even nuclear war (http://www.marketwatch.com/story/investors-are-in-denial-about-the-rising-risk-of-war-with-north-korea-2017-09-07).

I have no idea if Trump or his children Donald Jr., Eric, or Ivanka own any gold or gold stocks, but Trump is the biggest friend gold bugs have had since President Richard M. Nixon suddenly "shut the gold window" and ended convertibility of the U.S. dollar into gold on August 15, 1971.

This column has been negative on gold (http://www.marketwatch.com/story/an-open-letter-to-investors-who-are-bullish-on-gold-2015-07-23) for a long time. Since the yellow metal peaked above $1,900 an ounce in August 2011, I've written that it is in a secular (long-term) bear market (http://www.marketwatch.com/story/sorry-gold-and-silver-lovers-the-partys-almost-over-2016-07-13), which could go on for years and send prices much lower than the current $1,275.

Why? Because the dollar is still pretty strong and the U.S. economy is in decent shape -- with inflation so low even Federal Reserve chairwoman Janet Yellen can't find much of it (https://www.federalreserve.gov/newsevents/speech/yellen20170926a.htm). And as the Fed raises interest rates gradually and begins to reduce its $4.5-trillion balance sheet (http://www.foxbusiness.com/markets/2017/07/12/fed-prepares-to-cut-4-5-trillion-portfolio-what-it-means.html) -- a process that may speed up if Yellen is replaced -- the rationale for owning gold has in fact become even weaker.

Perennial gloom-and-doomers (http://www.marketwatch.com/story/doom-and-gloom-investors-led-astray-by-politics-2014-05-29) like Peter Schiff, whose prediction gold would hit $5,000 an ounce I labeled one of the five worst investment calls (about:blank) of the 21st Century so far, have looked more and more wrong.

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