The Politics of Investing in Gold

Since Election Day, the markets have undergone a decided move to the upside. However, the action in markets has been anything but uniform.

In fact, there’s been a Trump rotation of sorts out of sectors such as technology, utilities and bonds, and into sectors like financials, industrials and defense stocks.

Yet this rotation in capital isn’t about politics. Rather, it’s about what sectors are likely to do well as the Trump administration begins implementing the economic plans it announced it would during the campaign.

The point here is that when it comes to most investments, politics is a minor factor. Rather, it’s the result of the politicians and their actions that could make an investment more or less valuable.

This is true of stocks, bonds and most commodities … unless that commodity is gold.

When it comes to investing in gold, the yellow metal itself has a reputation as being an investment for more conservative, or libertarian, types. But that all could be changing now that Donald Trump will be president.

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This is the interesting thesis I read recently in an article at the website Energy & Capital, written by Luke Burgess.

Here, Burgess makes the following observation:

Gold is a fundamentally conservative investment vehicle. It’s a tool for the preservation of labor. And there is no doubt that the metal appeals to those with a conservative mindset — politically, socially, and economically.

For the most part, liberals view gold as a relic of monetary history. The general idea is that gold’s importance is only what you make of it. That is to say, gold can be valuable as a metal for jewelry or technology, but it has no monetary value. In short, gold is not money to most liberals.

This observation intrigued me, as it concurs with my assessment of the political element often tied to a person’s affinity (or not) for gold.

Burgess goes on to say that:

But that could be changing … And it has everything to do with Trump … The far left is freaking out over Trump. They are completely losing their sh**.

While I do know that a lot of people, not just those on the far left, are “freaking out” over Trump, I’m not sure if that means they’re turning to gold.

But Burgess goes on to address that thought, giving us the following analysis:

To the liberals, he’s [Trump] a selfish brute who doesn’t care about those long-term economic consequences. And they’re freaking out about what to do with their money.

Burgess then related a story of someone he talks to on a regular basis who is both liberal and very worried about what a Trump administration is going to do with the economy.

This man told Burgess:

“Never in a million years did I ever think I’d want to own gold … now I’m considering it.”

Of course, Burgess admits that this is merely one anecdotal example of someone on the political left that is, for the first time, considering buying gold.

Yet I, like Burgess, very much doubt that this liberal investor is the only one.

If this is the case, then might that mean a sort of “liberal tailwind” on the horizon for gold?

Burgess thinks so, writing:

Are the liberals becoming so afraid of what they think Trump could do to the U.S. economy (as well as to geopolitics altogether) that they’re now, for the first time in decades, willing to accept gold as a legitimate storage of wealth?

And if so, consider how much that would open up the gold market to new investors. As unexpected as it might be, the far left may even turn out to be the group that sends the gold market into mania.

Over the past four weeks, gold prices have plunged nearly 10%.

That’s a move that’s got many buyers interested again, and not just the Johnny-come-lately liberals worried over what Donald Trump is going to do.

The bottom line here is that demand for gold could soon be increasing from a most-unlikely source — Trump haters on the left side of the political spectrum.

And, if that group starts buying, look for gold to get a renewed political shine.

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What do you think about the politics of gold? Are you buying gold because you’re worried about what President Trump will do? Or, are you buying because gold is at a really good price right now? Or, are you staying away from gold? I’d like to hear what you think about all of the issue we cover in the Afternoon Edition. Fortunately, doing so is easy. All you have to do is leave me a comment on our website or send me an e-mail.

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Stocks finished the session mixed for a second-straight session. The November jobs report, which showed the economy creating 178,000, was considered to be in the “Goldilocks” range.

That means it wasn’t “hot” enough to pull forward Fed rate hike expectations in 2017, but it wasn’t “cold” enough to keep the Fed from likely hiking rates at the December 16 FOMC meeting.

Good luck and happy investing,

Brad Hoppmann
Publisher
Uncommon Wisdom Daily

Your thoughts on “The Politics of Investing in Gold”

  1. Brad:

    I am not disagreeing with your thesis here but thought a few additional “price Drivers” should be mentioned. I outline these in the following bullets for consideration:
    1. Major bank failures are on the horizon for the largest banks of Italy and Germany. This will undoubtedly affect world banking markets due to interconnection and holds the political possibility of wrecking havoc on the Euro as well.
    2. Major “hoarding” (excuse the word) of Gold is occurring in China and potentially Russia. Gold supply may soon be substantially exceeded by Gold demand for the bullion.
    3. The Feds are out of ammunition to reduce the impact of down economic situations. Gold reserve positions may get strengthened both physically and politically as a consequence.
    4. Major suppliers of Gold will find it increasingly difficult to ramp up production if they have not developed new sources and my understanding is that new sources are not in abundance.
    5. Major inflations may (likely) occur in a pro-growth lowered tax environment especially if trade becomes more restrictive. Inflation usually produces higher Gold prices.
    6. The charts are all in a consolidating pattern which probably leads to some sort of rally in the near future especially as the consequences of IMF announcements and the future of certain currencies (like the EURO) become more uncertain.

    Your thoughts continue to be welcome.

    Greg

  2. As the typical serious gold-bug may also be a prepper and a purveyor of dark conspiracy theories of all sorts, as well as a wearer of a tinfoil hat to ward off the effects of chem-trails, I think I’d have to agree that he isn’t likely a lib. That’s a plus for libs, of course. But I doubt that merely being a lib means that gold is off the table. As Phil said, it’s all about making money, and anyone who takes seriously the idea of making money in the markets will very likely have considered gold regardless of political affiliation.

  3. I buy gold for one reason only: to make money! I don’t give a hoot about gold or any particular stock, but like Mr. Wonderful, I like money. Is anyone on this site for any other reason?

  4. If gold wasn’t so valuable (and useful and used as a currency) why is it so manipulated?
    It will all unwind sooner or later and gold’s real world value will be determined.

  5. A liberal who I know very well is, for the first time ever and as a direct result of the Trump victory, asking me about buying gold.

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