Gold Has Outperformed The Dow/S&P 500 Year to Date
The price of gold has been in a nice—albeit controlled—uptrend since late December.
Gold is up over 12% since December 22, 2016. By comparison, the S&P 500 is up 7% and the Dow Jones Industrials Index is up 6%. Apple is responsible for 13% of the S&P 500 move higher, and 25% of the Dow move higher. The primary drivers of gold besides elevated geopolitical risk are the expectation of an easing of monetary policy, and the fall in value of the US dollar.
While Kranzler doesn’t think the effort will yield success, the only way the US government can stimulate economic growth, other than by printing another few trillion and distributing it across the population, is by trying to stimulate the demand for US exports globally by devaluing the dollar vs. the currencies of its primary trading partners (Canada, Europe, China).
As with any form of government intervention, this will further destabilize the US financial system. That said, most other major industrialized countries (except for Russia) are devaluing their currency vs. global currencies in order to bolster their export industries.
After the recent employment report, in conjunction with the negative economic reports, it’s likely the Fed’s next policy shift will ease monetary policy and further enable the expansion of credit. When this reality hits the market, the hedge fund algos will take gold and the mining stocks higher.