Gold sold off sharply since the election based on the belief that President-elect Trump will bring higher growth. This sell-off makes little sense for those who understand that gold is an investment in monetary policy failure and the destruction of paper currencies. Central banks remain hell-bent on printing money and creating inflation in order to deal with epic levels of global debt. Donald Trump’s election not only doesn’t change that reality but likely exacerbates it since the President-elect plans to take dramatic steps to promote economic growth that will further increase US debt. Investors should use recent weakness in gold to add to positions.
The stock market continued its post-election rally last week though things may be calming down. The Dow Jones Industrial Average added 284 points or 1.5% to close at a record high of 19,152.14 while the S&P 500 jumped 31 points or 1.4% to a record 2213.35. The Nasdaq Composite Index also rose 1.5% to a new record 5398.92. The small cap Russell 2000 Index, however, left these three large cap indices in the dust since the election as investors convince themselves that a new anti-regulation president will lift the boot of the government off the backs of small and mid-sized businesses. The Russell rose for 15 straight trading sessions and is up 15.8% since the election.
But that doesn’t mean gold is doomed.
Investors who believe the yellow metal is headed down long-term are missing one very important thing.
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