The Trump Effect on Gold - A Platinum analysis

The Trump Effect on GOLD

The 45th President-Elect, Mr. Donald J. Trump is ready to take on the challenge. Currently, the stock markets are breaking all-time high’s, but can this continue?

There is a burst of fresh optimism to the instability being removed from the markets. Do the markets deserve to be at all-time high with a country that is in debt for over $20 trillion?

“We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals.  We’re going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it.”

Let’s analyse this statement by Mr. Trump and combine that with the promises he made during the campaign:

• Trump will spend more than $500 billion on infrastructure spending.
• Provision of $137 billion in tax credits for private companies to spend on infrastructure projects.
• By some estimates, that could create a boost in GDP and help create as many as 200,000 jobs in the initial years.

We as traders, need to take into consideration that infrastructure spending will lead to bigger deficits, meaning still more borrowing by the federal government, adding to its already massive debt.

Where will this money come from for this additional spending on the infrastructure?

This money will come from printing money i.e. Quantitative Easing which will lead to higher inflation thereby causing the price of Gold to initiate the Bull Run.

What happened to Gold on the US Election Day and Why?

There were two moves on the US Election Day:

1. A) BULL MOVE: Gold Prices went up by 60$ in a couple of hours when the news emerged that Trump was going to win.
2. B) BEAR MOVE: Gold prices erased all its gains. Why? If Trump won, the price should have taken off like a rocket correct?

Let me explain why we saw this Flip and Turn in the markets.

The Modi Effect

While the whole world’s eyes were on Trump, the Prime Minister of India, Mr. Narendra Modi made one of the most explosive announcements in the history of India. Modi had directed that 500 and 1000 Rupee notes will be banned. These notes represent 20% of the cash value in circulation and 80% of cash outstanding.

To understand the heavy selling of Gold from India on Modi’s move, one must understand the underground economy in India that runs on black money.

Estimates have been that the underground economy in India is a huge 20% to 25% of the total economy and so the most common method to convert black money into white money over the past 50 years has been too slowly purchase Gold by paying in cash using large bills. Converting black money into white money has been a major source of demand for physical gold. Now that large bills used to buy Gold would go worthless, demand for physical Gold would decline.

However, we believe that this reaction is only temporary and that the world demand for the Gold as the safe haven will balance itself out.

GOLD Bull Run: Trade Levels to Watch

Technical Reasons:

1. Harmonic Wave BC should be complete at this price and the new wave CD should begin.
2. Previous demand level come into play (19th of May 2013 to 22nd march 2015).
3. 2 % Fib-Confluence which is the Platinum Stop Hunt Level should give support to the trade.
4. Risk reward is 20 points to gain almost 185 points.

If you have any questions on how to trade this Gold move or Platinum’s easy Trading Strategy, please get in touch with one of our mentors and we shall guide you step by step on taking this trade.

The Platinum Way

We trade the Institutional Way by letting the market come to us and being patient. Being patient will always be a virtue and it’s no different in the FX market.

“Patience is not an absence of action; rather it is timing, it waits on the right time to act.” ~ Fulton J. Sheen

The Platinum Long Term Strategy:

1. Great strategy to use for Part-time traders allowing for flexibility so can set and forget.
2. 78% success rate.
3. Over 6000 Pips made using this strategy this year.

Have a beautiful day and an even wonderful week!

Nisha Patel

Live from the Platinum Trading Floor.