Gold, not dollar, is the best Trump trade, survey shows
Trump’s platform of tax cuts, tariffs and weaker regulation are viewed as inflationary on Wall Street.
The World Gold Council’s 2Q report had one big chart showing a big stampede out of ETFs.
Over 400 tonnes of gold flowed out of ETFs as the prospects for the US economy brightened, and the end of the Fed’s quantitative easing program became more real.
The move out of gold was enough to dampen gold demand by 856 tonnes (US$39 billion), down 12% compared with Q2 2012.
But lower prices saw an equally big pick up by physical gold investors, especially in Asia, who snapped up gold bars and coins.
“The consumer market for gold was once again dominated by global leaders India and China, which together accounted for almost 60% of the global jewellery sector and around half of total bar and coin demand,” writes the authors of the World Gold Council report.
“On a year-to-date basis, total consumer demand (for jewellery, bars and coins) in each country is almost 50% ahead of the same period in 2012.
The World Gold Council warns that gold may have difficulty maintaining this momentum going forward.
“Bar and coin demand may struggle to maintain the exceptional levels of the past quarter, however it has solid underpinnings – most notably in the Asian markets.”
Creative Commons image of the Christmas tree by jciv. Chart from the Q2 2013 Gold Demand Trends report
3 Comments
CogInTheWheel
Those who buy physical metal commodities regularly know that ETFs have been main driver of price volatility. They don’t trust fiat currencies nor do they trust paper gold. As long as the dollar remains stronger than the 7 other currencies it is usually rated against we will not see significant changes upside the real price of gold. Volatility will continue as uncertainty in the current stock market grows. The real question is what happens when bond rates rise. The argument is not bulls or bears anymore, it is Keynesian vs Austrian. As long as central banks all tow the line and devalue buying power, Keynesian will rule the day. But if more measures such as Japan took on devaluing their currency or China keeping their currency low start a fiat war, perhaps Austrians will prove their points. At least in the US wages haven’t rose with the current economic news coming from wall street, which suggest to me that this ready for correction. Really will depends on the bond markets.
Bud Wood
Seems that the Ups and Downs of the precious metals markets are based, as usual, on emotions. Buying at tops and selling at bottoms simply aren’t the way to implement one’s investing. But, I suppose it’s popular. Reminds me of that observation that says, “If you’re doing what most other people are doing, you’re most likely doing things wrong”. – – – No, not at midpoints of any run but typically at the bottoms and the tops.
Frankinca
Since Asian economies are typically growing and western ones are mostly stagnant, then betting on gold which is favored by the growing economies seems a safe bet. The central banks of western nations are addicted to dollars and will bet all their gold bullion and their hypothecated type to make this happen, to discount the value of gold as a reserve asset. Thus making the Asian countries richer in gold by giving them basically, huge discounts in the price, as they dump it and try to destroy it’s value in investors minds. Like QE, its effect is temporary and will backfire in the long run, so patience will have it’s reward.
As the Asians dump their treasuries and buy gold they will no longer be subservient to western economic systems. One can buy oil from other countries except Saudi Arabia with gold and that is as it should be. No one can stop commerce by withholding the means to provide a trading medium. The Special Drawing Rights system seem a reasonable way to eliminate the failing US dollar as a medium of trade and storage of wealth.