GOLD is Donald Trump’s favourite metal. The taps on his private jet are 24-karat gold-plated. His $100 vodka is adorned with a golden “T”. He even hankers after the gold standard. He must have found it gratifying, therefore, that gold soared to its highest price since Brexit after his overnight victory in America’s presidential election. But copper and industrial metals also rallied. They tell a similar story: prepare for reflation.
Gold is both a haven and a hedge against inflation. Initially, its rally appeared to be a rush for safety. The dollar and stockmarkets plunged as Mr Trump headed closer to victory, pushing panic-driven flows into the yellow metal. It pared gains from a high above $1,330 an ounce to below $1,300 as other markets took heart when the president-elect, in his victory speech, promised to double American growth and rebuild the country’s infrastructure. But gold bugs remain bullish because Mr Trump is likely to expand the fiscal deficit, and the uncertainty over the implications of his election may make it harder for the Federal Reserve to raise interest rates. Fiscal expansion and continued monetary looseness are both…Continue reading