LAWRIE WILLIAMS: Fooling the People

“You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time” was a statement by the USA’s 16th President, Abraham Lincoln and one that seems to be being studiously ignored by that great nation’s 45th presidential incumbent, Donald Trump.  Will his frequent economies with the truth come back to bite him in the 2020 Presidential election in November? 

The Democrats are in disarray, with some of their most popular candidates leaning hard towards a more socialist society – probably an unacceptable stance to the majority of Americans long propagandised to believing even a smidgeon of socialism is tantamount to communism.  Unless the Democrats can end up fielding a Presidential candidate who might be able to appeal to all sections of U.S. society – I favour late entrant Michael Bloomberg as having the best chance of so doing – we should therefore be resigned to four more years of the Donald, whose mantra of making America great again is alienating much of the rest of the world, although appealing strongly to an ever-increasingly gullible section of the U.S. population.

Tuesday’s State of the Union address by the U.S. President was a travesty of half truths, dressed up in a hugely blatant electioneering address worthy only of television marketing with which Donald Trump is something of an expert.  The blatant triumphalism of the Republican delegates attending, many of whom have little true rapport with Trump’s persona, or often with his policies, was indeed sickening to an outsider like myself, and one tends to have sympathy with Nancy Pelosi’s ripping in half of President Trump’s speech transcript whatever one thinks of the lady herself – often far from positive!

What may bring down Trump – assuming the Democrats can come up with an electable opponent – could be the state of the U.S. economy between now and the year-end.  It is not nearly as robust as the Trump Administration would like to have us believe.  And if the spread of the Wuhan coronavirus remains unchecked for even a couple more months, this element outside of President Trump’s control could have a hugely dampening effect on U.S. economic growth, even if its spread is able to be largely limited to mainland China.

Either way the result of the U.S. Presidential Election in November is likely to be positive for gold.  If President Trump is re-elected, as seems most likely at this point in time, the world faces four more years of unpredictability and shoot-from-the-hip diplomacy by the world’s top superpower.  A Democratic victory, with a party divided between left and right inclinations, would also generate a huge degree of global uncertainty as to what kind of global and domestic policies would prevail.  Gold, and perhaps silver, thrive on uncertainty, but we also warn that pgms, as very much industrial metals – palladium in particular – would not necessarily follow suit being much more dependent on the state of the global economy which we see as potentially fragile.  Silver currently falls somewhere between gold and the pgms being both partly regarded as a monetary metal, which tends to move closer to gold’s advances and declines, but also an industrial metal with industrial demand accounting for the greater part, and an ever-rising degree, of the metal’s global demand.

Dollar strength may also be key.  Currently the dollar is on the up with the dollar Index back over 98 and seemingly rising.  This is due no doubt to the coronavirus’s potential spread in Asia and the downgrading of many Asian currencies.  Japan, for example, has so far the highest incidence of coronavirus-affected victims (45 to date) outside China, although the total has been exaggerated by the visit of the Diamond Princess cruiseliner, currently in quarantine in Yokohama, with 10 so far confirmed coronavirus-infected patients removed to local hospitals.  China has so far reported over 28,000 coronavirus cases and 565 deaths (around 2%) but it is feared that the number of infections and deaths may be far higher than reported due to the country’s hugely overstretched health system.  Much will now depend on whether the virus spread can be contained outside mainland China.  So far the incidence has been relatively small, but it is early days yet.

So currently we see two major factors as likely affecting the global gold price.  These are, most importantly, the continuing spread of the Wuhan virus and then the U.S President’s capacity for keeping most of the U.S. populace fooled over the true state of the Union.  Add to that the U.S. Democratic Party’s selection process for a Presidential candidate to oppose Trump and then any number of potential geopolitical flashpoints around the world.  As we noted above, gold thrives on uncertainty and there are any number of global uncertainties, any of which could take centre stage at any time, and see gold and silver advance strongly.

06 Feb 2020

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London - recently described as the World’s No. 2 University (after MIT).

e: lawrie.williams@sharpspixley.com