Much of what has happened in the U.S. stock market so far in 2017 is relatively easy to explain. Investors see President Donald Trump’s policies of deregulation and lower corporate taxes as rocket fuel for U.S. business, and the stock market has certainly reflected that optimism since Election Day. The SPDR S&P 500 ETF Trust SPY 0.06% is up 10.2 percent since the election.
Gold On A Rip
At the same time, Trump’s protectionist rhetoric will likely continue to keep the U.S. dollar strong relative to international currencies.
“Largely, the USD will appreciate because U.S. protectionism will cause economic weakness overseas and underscore the importance of the U.S. as the safe harbor for investment,” Kennesaw State University associate professor of economics Mikhail Melnik, Ph.D. recently told Benzinga.
Since Election Day, the PowerShares DB US Dollar Index Bullish UUP 0.87% is up 2.9 percent.
Finally, the major market volatility that many experts predicted might happen following a Trump victory is nowhere to be found. The CBOE Volatility Index (VIX) is down 15.1 percent in 2017, and the iPath S&P 500 VIX Short Term Futures TM ETN VXX 2.88% is down 27.6 percent year-to-date.
The current market environment would typically be a recipe for disaster for gold investors. However, that simply hasn’t been the case so far in 2017.
Bucking Historical Trends
The SPDR Gold Trust (ETF) GLD 0.06% is up 9.2 percent year-to-date, and the Market vectors Gold Miners ETF GDX 1.23% is up 17.0 percent. Levered gold funds Credit Suisse AG – VelocityShares 3x Long Gold ETN UGLD 0.1% and Direxion Shares Exchange Traded Fund Trust JNUG 7.35% are up 28.3 and 103.0 percent this year, respectively.
But Why?
Why has gold been so strong in 2017 in a climate of rising stocks, rising interest rates, a rising dollar and plummeting market volatility? Traders may be looking to have their Trump cake and eat it too by taking advantage of rising stocks and a stronger dollar while still using gold as a hedge against the potential impact of negative geopolitical headlines.
Historically low (and even negative) interest rates around the world have left…
Click here to continue reading
Want to learn more about how to profit off the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!
