Gold heads lower ahead of Trump inauguration

"Trump is very pro-business and would like to boost the USA manufacturing and export sectors", says Randy Frederick, vice president of trading & derivatives at the Schwab Center for Financial Research. The metal is priced in the USA currency and becomes more expensive for foreign buyers when the dollar rises.

The trouble with a strong dollar gets to the heart of Trump's promise to pump up the volume of American exports: it makes goods and services produced in the US more expensive relative to those produced in other countries. There are also other factors playing in favor of a stronger dollar, such as relatively high US interest rates compared with the rest of the world and the expectation of domestic growth. "The tax cuts (and possible spending increases), enacted at a time of full employment, will result in higher interest rates and this will boost the dollar", Martin Bailey, the chair in economic policy development at Brookings, said in an email.

Since then, Sinche noted, "once that "strong dollar" policy was put in place, it's been very hard to undo it. Treasury secretaries for the last twenty years now have come through and reiterated the policy, just because it was something to say".

BBH analysts added that comments by San Francisco Fed President Williams and Fed Governor Lael Brainard basically "reiterated that fiscal stimulus could lift growth and boost the deficit, and that monetary policy would have to take that into account". "It sounds good to say 'we have a strong dollar.' But that's about where it stops", he told an interviewer in 2015. The dollar index, which measures the greenback's value relative to a basket of foreign currencies, reached a 14-year high at one point. "I think the answer to those questions is "no", the analyst said".

What's the harm of a strong dollar?

The dollar was trading at 100.44 against a broad trade-weighted basket of its peers and is down almost 3.5 per cent from a near 15-year peak of 103.82 hit on January 3.Against the Japanese yen it was changing hands at 112.58. For the year as a whole, China's reserves fell $320-billion to $3.01 trillion, on top of a record drop of $513-billion in 2015.

Technically, February gold futures bulls and bears are on a level overall near-term technical playing field.

Aaron Rodgers hits Richard Rodgers for TD on free play
The man has made his mark, and he's never not going to diminish anything that LeBron James or Aaron Rodgers accomplish. The rest of the National Football League has five total during that span and no quarterback has more than one.

As a number of commentators remarked, Trump's comments to the WSJ were a significant departure from the policy stance of previous administrations over the past 20 years.

As an example, Trump's Treasury Department could try to weaken the dollar by buying up other currencies to drive up their prices relative to the greenback.

"Since the 1990s, if not before, all presidents and treasury secretaries have understood that to talk about the value of the single most important price in the global economy in terms that could be misunderstood can wreak havoc with the markets", he said. Although Trump did comment on Tokyo's manipulation of the Yen on the campaign trail, there has been little said on the subject from him since Nov 8th.

While investors have become somewhat optimistic on the outlook for Asian equities in the past two weeks - prompting regional markets to outperform developed market peers, underlying caution remains due to China concerns.

Third, the shape of the United States yield curve matters.

What have USA policymakers done in the past to keep the dollar strong?


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