There was hope earlier yesterday that president-elect Trump’s press conference last night would give some clarity into his economic and international trade policies. While Trump did denounce alleged ties to Russia and confirmed he still plans to repeal and replace Obamacare, the president-elect did not make any comments about his plans for the economy nor did he mention plans for tax reform.
The press conference left investors wanting more understanding of what fiscal policies to expect and drove them to rely more on the safety of gold.
Save Haven Investments Remain Appealing
Gold is now trading over the $1200 per ounce mark, continuing its rally since the beginning of the New Year. This trend is thought to be closely correlated to the geopolitical uncertainty with the coming inauguration of the newly elected U.S. president and other elections that could result in populist leaders. With understanding of domestic and international policies still hazy, this move to safe haven investments could continue past January.
Without more understanding about what policies are coming down the pipeline, investors remain uncertain about how the market will change. If policies are put into place that strengthen the economy and lead to Fed rate hikes, then risk-bearing stocks become more attractive.
Investors are preparing for a rate hike at least once in 2017, but it is uncertain if the hike will be enough to overcome the uncertainty investors have about the market. This struggle continues to dictate gold prices as daily updates on the president-elect are released.
The Market Reacts to Uncertainty
Gold price peaks are coming as a result of the market reaction to uncertainty. Later in the year, interest rate increases and a stronger dollar may cause a drastic change in investment strategies, but the current mood is that investors are unsure about the future. Without confidence in where the market is going, and the dollar declining, it makes sense that gold prices are continuing to climb.
Some market watchers believe that any gains the dollar made so far this year will rollback, leaving more room for gold investments. No one knows how long this rally for gold will last, but the continued lack of information suggests that the rally could continue for at least a few more weeks. As news comes out about policies, Fed rates, and European elections, the path for stable investing may become more solidified. Until then, gold could continue to be the safe haven investment of choice.
