Gold: Built Ford Tough?

Gold has been creeping higher in 2017, gaining in seven out of the last eight trading days.

Our resident natural resource expert JR Crooks told his Natural Resource Investor members this week that his expectations are for gold to continue rising to $1,366 — or even as high as $1,500 — in the next three months.

And while it probably won’t be a straight-shot from here, it looks like the low could be in.

Gold is up 2.6% so far this year, after notching an 8.5% gain in 2016.

There’s been a great deal of analysis done over the years about how stocks perform in presidential election cycles.

In the election year itself, the market tends to drop — especially in the final year of a president’s second term. A theory developed by Yale Hirsch states that U.S. stock markets are weakest in the year following the election of a new U.S. president. According to this theory, after the first year, the market improves until the cycle begins again with the next presidential election.

Of course, this election cycle was anything but traditional. And the same can be said for the stock market’s performance during the past four years.

Just looking at the Dow Industrials, they gained 27% during the first year of President Obama’s second term. And last year — an election year — they gained 13.4%.

So, just like any stock-market theory, it’s important to remember history is not indicative of future returns. So while you may not want to base your investment decisions based solely on those theories, the correlation between election cycles and the stock market is definitely something to keep in mind as you prepare your portfolio for 2017.

And not just your stock portfolio …

The inauguration of a new commander-in-chief this year also has the potential to impact gold prices.

If you’re wondering how the gold markets could perform under President-elect Trump, our friends at Merk Investments LLC sent out this chart yesterday that shows calendar year returns during presidential transitions.

Power transitioned from Democrats to Republicans in 1981, when Ronald Reagan took office. That year, gold fell 32.6% vs. the S&P 500’s 9.7% loss. And when George W. Bush moved into the White House back in 2001, gold gained 2.5% while stocks lost 13%.

As you can see, stocks supported the theory of a Year One dip, while gold was a mixed bag.

We’re intrigued by another unusual year, however — 1974, when Richard Nixon resigned and Gerald Ford ascended from the vice presidency. Gold soared 72.3%, compared to the S&P’s 29.7% decline.

While we are all rooting for stocks to surge, if we’re looking for gold to repeat any previous-year success, it seems we’re better off hoping "The Donald" is "The Gerald."

As JR put it, "Gold: Built Ford Tough!"

Happy trading,
The Uncommon Wisdom Daily Team