If you believe in Trump’s victory, bet on gold

10 September 2016, 01:13
Eko Rediantoro

Many institutional analysts wonder why would anyone buy gold notoriously known as a bad investment, paying no earnings, dividends or income of any kind. But the fans of this precious yellow metal have an axe to grind: gold tends to appreciate in times of crises of any kind. If there is a period of high inflation and financial instability investors hastily shoot towards traditional "safe haven" assets, one of which is gold.

For example, the price of gold sky-rocketed 25.7% so far this year due to a range of implausible events (the British voted on “Brexit”, the EU is wrestling with an influx of refugees and reoccurring outbursts of terrorist attacks, war in the Middle East, tensions in Ukraine, presidential crisis in Brazil in the eve of Summer Olympic Games). We are living in a tremendously volatile world and nobody is proof against the emergence of new political and economic risks.

The prospect of a Trump presidency can be considered as one of the kind of the aforementioned risks. The financial markets can also be affected by Trump’s victory in the forthcoming US presidential elections, which will take place on November 8.  It also may pose a serious threat to the value of dollar.  Mr. Trump, known to be a great fan of yellow precious metal, once even mentioned that he kind of likes the idea of returning to the gold standard. Thus, we may expect that under his presidency positions of dollar can be challenged and gold start glittering a little bit more brightly.Citi’s strategists believe that gold prices could surge past $1,400 to levels not seen since early 2013 if Trump manages to win presidency.

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