Gold probed briefly above $1300 in early New York trading, establishing new highs for the year, but these gains could not be sustained. The yellow metal is presently trading modestly lower on the day.
The retreat may have been simple profit taking ahead of the weekend, but the media is reporting a relief rally in risk assets on the apparent ousting of White House chief strategist Steve Bannon. While Bannon was perhaps one of the more divisive members of President Trump’s inner circle, I don’t quite understand why this is a risk-on event.
Nonetheless, stocks have rebounded and bonds and the yen have retreated along with gold. I suspect however that the departure of Mr. Bannon will do little to mitigate the ongoing drama in Washington; just as the ousting of Flynn, Spicer, Priebus, Scaramucci et al only amplified the political uncertainty.
That rising political uncertainty has been a driving force behind gold in recent months, which also magnifies to some degree the geopolitical uncertainty. Constant turnover within the President’s inner circle does nothing to clarify, nor improve the likelihood that his domestic agenda, trade and foreign policy will be advanced. That reality would seem to mark this dip in gold as yet another buying opportunity.
Earlier today, as gold was setting new highs, Zerohedge tweeted the following:
This is no surprise to our reader, nor those of the Zerohedge blog. However, I suspect it would come as a shock to many that only get their financial news from CNBC for example. Those investors that are still heavily allocated to shares, despite the frothiness of that market, are playing with fire. They could have diversified their portfolio with some gold this year and not paid any price in terms of performance to have that insurance.
Portfolios with a gold component tend to perform better over time anyway. It’s never too late to start building a hedge.