You Don’t Need to Worry About Trump-Era Inflation [Yet]

18.11.2016 • Politics and War

By Vern Gowdie – The Gowdie Letter (Australia) –

Over the years, I’ve read a lot of Hunt’s research on the bond market. When others were calling for inflation in 2009/2010/2011 (remember, the gold price shot up to US $1,900 an ounce on the expectation of QE stoking the fires of inflation), Hunt went against the popular thinking. He argued, correctly, that inflation was not that easy to create.

Hunt is saying the same thing now…that the declining secular trend in Treasury bond yields remains intact. Which means long-dated interest rates are destined to resume the trend of going lower.

Gold appears to be in a state of suspended animation, not knowing whether to go higher or lower. After a spectacular rally on Election Day, it’s been all downhill since.

Given that gold is, once again, being beaten up by investors, I expect a rally to occur. However, my longer-term view is that, when the next crisis hits, gold will be thrown out with all the other markets’ bathwater. People are going to dump assets to get their hands on cash. More specifically, US dollar based cash.

Trump does not take over until 20 January, 2017. None of the infrastructure projects are ‘shovel ready’. Anyone who’s ever built a home knows the lead time to finalise plans, gain council approval, call tenders, sign contracts, and finally commence building takes the best part of a year. Building airports and a 10-metre-high wall that stretches a few thousand kilometres is a tad more complicated than your garden variety Aussie home.

Personally, I think the markets are jumping at shadows. And when everyone is thinking the same, usually it means no one is thinking at all.

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