Gold prices hit highs on Monday that they hadn’t seen in two months, as the dollar took a hit and dropped lower. While that wouldn’t ordinarily be a surprise, Gold hadn’t been particularly consistent in tracking the dollar of late, so it was still a welcome sight to Gold bugs. And there were a few other interesting things, as well.
The dollar took a sharp dip on Friday after the inaugural speech, and 10 year US Treasury yields took a nose dive, as well. On Monday, though, the dollar bounced around a bit. It floated a tad higher on the news that the president was about to withdraw the United States from the controversial TPP (Trans-Pacific Partnership) trade deal. But, by the end of trading on Monday, the dollar had sunk to a new 7 week low against the Euro.
Still, the dollar wasn’t the only influence on higher gold prices today. While Russian and OPEC oil officials all said on Sunday that they still intend to decrease their collective oil output, NYMEX crude oil prices were still trading weaker today. There is still some fairly stiff technical resistance on the charts sitting slightly over the current crude oil prices, so that was almost certainly a contributing factor.
It had been a while since gold prices reacted to political and economic uncertainty in the way it usually has in the past. But this week, just like it began tracking the dollar, it also reverted back to expected behavior in the face uncertainty.
All of the “Trump trades” initiated late last year were betting on higher inflation and strong growth. After a few days in office, investors seemed to be a little less sure of what might be coming in the near future. Bank of America Merrill Lynch revealed last week that precious metal funds experienced their largest inflow in five months as investors tried to hedge those end-of-year trades.