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Trump's 'America First' Keeps Feeding Commodity Bulls - TD Securities

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Trump’s ‘America First’ Keeps Feeding Commodity Bulls - TD Securities

(Kitco News) - U.S. President Donald Trump’s ‘America First’ agenda “keeps on giving to the commodity bulls,” which is creating a bid for gold, TD Securities said in a report.

“The gifting started back in November 2016, when the newly minted President-elect Trump promised America a massive infrastructure spending program. More recently, the President followed up by delivering massive corporate and individual tax cuts, without triggering concerns the Fed will aggressively hike rates,” said Bart Melek, global head of Commodity Strategy at TD Securities.

One of the biggest reasons for the commodity bull market has been weaker U.S. dollar, which has recently accelerated its path downwards, as U.S. Treasury Secretary Steven Mnuchin suggested that weaker USD is good for trade, added Melek.

“Commodity markets will continue to attract a bid,” he wrote. “Crude oil, gold, zinc and copper could all be materially higher than they are today throughout 2018.”

Last week, gold rallied to 1.5-year high, touching $1,366 an ounce following Mnuchin’s comments.

As Asian markets opened on Monday, spot gold on was at $1,350.00, up 0.05% on the day.

Live 24 hours gold chart [Kitco Inc.]

“The idea that US official policy will try to attempt to depress the greenback likely prompted traders to take outsized gold bets as protection. And while the President tried to walk back the idea that the administration wants policies to lower the USD, the market did not react much as he has made such statements before,” Melek said.

In the next couple of years, the pressure on the U.S. dollar is unlikely to subside, added Melek, pointing out that the Fed is projected to near the end of its tightening cycling in 2019.

“High debt, potential inflation, at a time the Fed is signaling modest hikes, and very fully priced equity markets suggest that investors may well continue to position in gold as the business cycle becomes more and more mature,” Melek said.

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