By Alec Hogg
Once in a while the investment universe’s planets align. They provide those paying attention with a moment of absolute clarity, providing the opportunity to swing at a rare fat pitch.
We’ve got one of the money world’s dripping roasts coming at us right now.
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Gold price is a notoriously difficult trade. At its most basic level, the yellow metal responds to fluctuations in demand from its biggest supporter, the common folk of gold-mad India. But bullion’s really big moves always ride on the back of global uncertainty.
For centuries, the yellow metal has been a store of transportable value. It serves as the ultimate insurance policy for human beings in risky geographies during turbulent times.
And you need to regress some decades to find a period quite so dangerous as the present.
Gold’s reaction to Donald Trump’s election is consistent with the human condition which causes us to over-estimate the immediate impact of major changes – but under-estimate their longer-term consequences.
Bullion enjoyed an excellent session on November 9, rising above $1 300 an ounce as it became clear that Trump had pulled off the biggest Presidential election shock in three quarters of a century.
But the sun rose the next day and, incredibly, at its current $1 223 the gold price is now $50 BELOW where it traded immediately before the supposed Clinton landslide vote.
Why?
For one thing, Mr Market has the attention span of a mosquito. For another, the mass media has been painting a picture of post-electoral chaos in Team Trump. Perpetuating the myth that the billionaire property tycoon leads a group of shambolic idiots who simply lucked out.
Once again, the media elite is reading it wrong. From what I’m observing, Trump’s behaviour has been pretty consistent thus far. To whit, he is single-mindedly pursuing twin priorities of disrupting the Washington political establishment and destroying ISIS. The latter is a modern day crusade certain to excite gold bugs.
On the first objective, Trump has acted decisively to suggestions of not “draining the swamp” of Washington corruption.
On Tuesday night, his Vice President-elect Mike Pence was speedily installed as head of the new White House’s Transitional Committee which has 10-weeks to select 3 000 political appointments.
Pence, who describes himself as a “Christian, a conservative and a Republican – in that order” moved at lightning speed to eject his predecessor together with the lobbyist appointed to the committee.
Trump has declared war on Washington’s 30 000 lobbyists, the well-paid influencers who are commissioned to shape policy in favour of their mostly corporate clientele. By parachuting in his closest political ally to restore order shows clear intention. Lobbyists will be given no succour by the new Administration.
On the second point, Trump’s determination to prioritise the destruction of ISIS is now equally obvious.
His immediate post-election declaration of support for an anti-ISIS alliance with Vladimir Putin is well documented. So is the fact that Russian bombing has escalated significantly since Trump was confirmed as the next occupant of the Oval Office.
The agenda was confirmed on Tuesday at a Wall Street Journal conference in New York by Rudy Giuliani, the city’s 9/11 Mayor and favourite to become Trump’s Secretary of State.
Giuliani re-affirmed the new Administration’s top international priority is the elimination of ISIS, a body which he believes to be more dangerous than Al-Qaeda: “It has cells in 32 countries – and we have over 1 000 investigations into ISIS groups in the US alone.”
Trump and Giuliani are playing open cards. They have telegraphed an escalation in global conflict. Like most politically conservative beings, they pride themselves on carrying out stated intentions.
Whatever you think of the morality of their approach, there is one rather obvious consequence: The world will become a more dangerous place.
Having Trump, Giuliani and Co shaping America’s foreign policy is like adding supercharged fertiliser to the gold price. Best to acquire your own insurance soonest.
