Trump & Gold: Positive Correlation? - Gartman, Lanci Chime InBy Sarah Benali of Kitco News
Wednesday August 31, 2016 07:59
(Kitco News) - GOP presidential nominee Donald Trump and gold seem to have a lot more in common than we think, especially when looking at polling results.
And, now that his popularity seems to be waning, could prices move lower?
Earlier in the year, the real-estate mogul was leading in the polls for Republican primaries, becoming a true contender in this presidential election. At the same time, gold had its best two quarters in years, rallying nearly 30% since January.
Kitco News looked at this seeming pattern back in May, comparing the data and found that there is somewhat of a positive correlation between the billionaire’s latest poll results and the price of gold this year.
Now that the likelihood of a Trump presidency has dropped, gold prices have also moved lower, falling to two-month lows this week.
Could there be a correlation or is this just mere coincidence?
According to some analysts, it probably is just a fluke.
“It has to be a coincidence, because the market is wise enough to know that Mr. Trump has no chance of becoming the next president and thus cannot and will not affect monetary and/or economic policy here in the U.S. or abroad,” popular newsletter publisher Dennis Gartman told Kitco News Tuesday.
Echobay Partners’ managing partner Vince Lanci echoed Gartman’s comments in that despite the pattern, gold is really being driven by other, “non-election” factors right now.
“I feel gold is more and more a reflection of the slow reality that it doesn’t matter who is president except at the margin. Gold is reacting to the world of NIRP [negative interest-rate policy],” the longtime trader explained.
To Lanci, the best way to explain the parallel between Trump and gold is: investors view that a Trump presidency would bring about uncertainty, which would bode well for the yellow metal.
Regardless, he said it would be a “long shot” for Trump to actually get elected. Instead, Lanci said he is ignoring the noise surrounding this year’s elections, especially the polling data.
“His odds have dropped on this chart but polling is very unreliable in this election cycle….the election is increasingly digital, based on the last news story on Clinton Foundation or how Donald put his foot in his mouth today.”
Where do gold prices go from here?
“In dollar terms, perhaps quietly higher, with the operative word here being ‘quietly,’” said Gartman.
“In EUR terms, however, I am quite bullish for the European monetary authorities have no choice but to err expansionarily while the monetary authorities here in the States are soon going to err constrictively… leading to higher gold/EUR prices but merely steady gold/dollar prices.”
Lanci said if Democratic nominee Hillary Clinton were to become the next president, stocks would likely rally and gold prices would fall.
“[B]ut that would be a dip to buy as it would be hot money hedgers getting out,” he added.