Politics are a really stupid thing to pay attention to if you want to make money in the markets.
That’s a big reason why I try not to weigh in on politics, but it’s almost impossible now that social media algorithms have turned everything into a political game to be won or lost. If you’re a media company of any stature, you unfortunately have little choice but to “gameify” every news story to be either for or against some political movement or figure.
This game works best if these media firms can aggravate and enrage half of the population against the other half, for the simple and perverse reason that outrage generates more clicks and more revenues. President Trump happens to be our society’s most effective lever to generate outrage and argument.
So when I talk about Trump or the Fed or central banks, etc. – I want to make it clear that it’s not because I’m interested in getting into the middle of a political tussle. It’s because the subject at hand is likely to be informative for our gold investment outlook.
I hate that I even have to make this kind of meandering disclaimer, but inevitably anything I say related to Trump will enrage someone in some way.
My perspective on politics is they rarely inform investment decisions with any accuracy, so you should not inject them into your analysis.
For instance, yesterday the Trump administration announced it was firing Lisa Cook from the Federal Reserve board. It’s relevant because Ms. Cook will be replaced by a Trump appointee who is all but guaranteed to be exactly as inflationary and dollar destructive as Trump wants them to be.
Cook was a Biden administration appointee who – disregarding anything else you might want to say about her – was at least resistant to Trump’s monetary policy goals.
With her removal, it paves the way for Trump to have a 4-3 majority at the Fed:
And when Chairman Jerome Powell’s term is up next May or he steps down, Trump will have a 5-2 majority…
There’s some legal inside baseball of whether Trump is even legally allowed to fire Fed members. If you’re a constitutional trivia fan, you might be getting excited about the intricacies of what this firing could mean.
My takeaway as a gold analyst is to focus on what’s likely, not what’s constitutionally valid or sound. I think it’s very likely that Trump will get his way.
He’ll get very dovish fiscal Federal Reserve members who are willing to push monetary easing to the limits. Cutting rates, monetizing debt, and weakening the dollar were always on the menu, but if Trump gets his way, all of these trends accelerate, and they’re all bullish for gold and our gold recommendations.
The bulk of the research I do into these investments is creating detailed models based on various factors – and the price of gold is obviously a big factor.
A company that’s losing a $1/share every year at $1,000 gold turns into a cash-machine at $3,000 gold, and a 10-bagger at $5,000 gold.
I tend to conservatively value gold investments at lower than the prevailing price, but even at $3,000, many of the companies I cover are drastically undervalued.
It’s impossible to guess where gold will be in 6 months, let alone a year or five from now. But if Trump gets his way at the Fed, we might look back at $3,400 gold wistfully, wishing we had bought more now before the next era of easy money policy begins.
And look, I’m no constitutional scholar… I’m just paying attention to what’s going on with US and global monetary policy – like I’m sure you are to a certain extent.
So you have to ask yourself: what do you think the likely outcome is at the Fed? What do you think happens to the price of gold in the ensuing months if Trump gets his way?
No market goes straight up, but over the past few months, gold has traded flat, seemingly waiting for some kind of news to break. Where do you think gold will be in five years?
I know where I think it’s likely to be… and it’s not at $3,400.
Best,
Garrett Goggin, CFA, CMT
Lead Analyst and Founder, Golden Portfolio