Trump Loves Gold, and Gold Bugs Are Loving Trump

Wed, Apr 18, 2018 - 11:57am

trump tower

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President Trump is widely known for his strong affinity towards gold, and an increasing number of strategists believe his policies are making gold's shine even brighter.

This time on Financial Sense Newshour we spoke with well-known gold analyst John Ing of Maison Placements Canada Inc. about gold’s prospects and his 2019 target for $2,200.

Geopolitical Tensions Feeding Gold

The war drums are beating, Ing stated, and we’re looking at what amounts to a new Cold War. On top of this, there's the uncertainty of a trade war between US and China, the world's two largest economies, and the possibility for Trump pushing harder given perceptions that China has more to lose in such an environment.

“The president is not just saber rattling anymore,” Ing said. “It's tit-for-tat. And it's affecting not only America's biggest competitors but also its neighbors.”

Historically, the cost of a trade war is inflation, which coupled with the risk of a global slowdown this year, boosts the attractiveness of gold as a hedge, Ing stated.

Will Gold Stocks Play Catch Up?

Gold stocks have been lagging the metal itself, but this also may be changing, Ing noted.

For a long time gold producers could not produce at a profit. Now, fundamentals have improved and gold miners are generating free cash flow, he told listeners.

See related: Game Plan for Late-Cycle Investing

If money continues to flow into gold, pushing it over $1,400, Ing is projecting another major move into gold stocks given their leverage.

“Gold always gets crazy,” he said. “There's always a gold rush, and towards the end of the rush, that's when things get really, really wild and expectations are high. I don't think that will ever change. … It looks like gold is going to break out of that $1,365 ceiling. If it does that, then it should achieve my $2,200 target within 18 months.”

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