Trump & Gold: The Swamp Fights Back
Donald Trump was elected President of the U.S.A. with the promise to "Drain the Swamp."
In other words, to fight the "Establishment" and its vested interests which many Americans feel really control the nation’s politics and economics. So far he seems to be losing the battle, with the forces railed against him proving more powerful than the office of the President of the world’s primary superpower.
Or at least that’s the way it seems to a Brit outsider, and perhaps as an outsider – and a Libra to boot which means I tend to see both sides of any argument – one can come up with a better assessment of what seems to be going on than most Americans who tend to be wholly partisan in their views. They are either for The Donald or against him, and thus most commentators have their own political agendas to promote. This has led to perhaps the biggest schism in America’s political system ever and it makes for a hugely divided nation.
To an extent President Trump is his own worst enemy – a nightmare for GOP spin doctors. He is prone to making sometimes irrational statements, often in the form of postings on Twitter, which have to interfere with his Presidential image. He appears to ignore advice from his political aides and seems to take only cursory note of detailed briefings from advisers. He shoots from the hip and seems like he makes decisions based on gut feelings without necessarily being fully aware of the likely consequences of his actions. He is trying to run the nation in much the same way an all-powerful autocratic businessman runs a corporation.
If he wants something done it has to be done – NOW. Political office just doesn’t work that way, a fact which President Trump seems to be finding out to his cost. But it’s just not in his nature to change his modus operandi. Unless he mellows, to an outsider, America’s 45th Presidency looks doomed to end in ignominy.
While on his recent nine-day overseas trip, President Trump has been endeavoring to improve his image as an international statesman, both at home and abroad. But it is domestic matters which will remain his principal problem – not least among them the fallout from his summary firing of FBI Director James Comey, who was leading investigations into possible links between the Trump election campaign and the Russian state. A Special Prosecutor in the form of Comey’s predecessor, Robert Mueller, has been appointed to look into these accusations which have been overhanging the Trump Presidency from his election.
As Trump himself has said, this decision (to appoint a special prosecutor) “hurts our country terribly... It shows we’re a divided, mixed-up, not-unified country.”
Again, as an outsider, one can only agree with these sentiments and, as we have already seen, this appointment has hit the dollar and the equities markets, and the recent upturn in the gold price, which had been seen to be heading downwards, is yet another expression of a serious divide in the American nation.
In our view, there is so much briefing against The President in the mainstream media and from within the Security Services that this can only escalate and Trump’s probably overstated position on "fake news" will not be helping him. Some of the "fake news" he points to is demonstrably not fake at all, while other stories may well be. Such is 21st Century politics. Just because he’s paranoid doesn’t mean the "swamp" isn’t out to get him!
As for precious metals, any disunity in the U.S. is bound to have a destabilizing effect and probably put a dent in the U.S. economy and in the dollar index. There was something of a Trump bounce following his inauguration with the feeling among supporters that he would be a President who can get things done, but the reality is proving a little different with flagship policies being delayed in Congress and by the judiciary.
Trump is probably realizing that picking a fight with ‘the swamp’ is somewhat counter-productive on the ‘getting things done’ front, but whether he will learn from this and become less confrontational is, perhaps, unlikely although his appointment of a number of prominent bankers to key economic positions — notably from Goldman Sachs — suggests that perhaps he is not quite so anti-swamp as his rhetoric might suggest.
But, perhaps, it his summary dismissal of James Comey, and consequent talk by Trump opponents of impeachment, which poses the greatest threat to the Trump Presidency, and to the state of the nation.
Let us say straight away that the removal of President Trump by the impeachment process is, in our view, highly unlikely.
No U.S. President has ever had his office terminated by the impeachment process. It may only take a simple majority in the House of Representatives to put the impeachment process in motion, but it is the Senate which has to make the decision to impeach and remove, and it requires a two-thirds majority to do so.
Republicans have a majority in both houses, and while it might be possible for a sufficient number to change sides in the House of Representatives and achieve the simple majority to move proceedings to the Senate, it seems beyond doubt that the necessary two-thirds majority in the Senate would not be achievable — particularly as it is also in doubt whether President Trump has actually done anything that is technically indictable or illegal.
The latest episode which has the anti-Trump media in a tizzy — the supposed security breach in conversations with the Russian Foreign Minister, Sergey Lavrov, seems more like a storm in a teacup. Indeed to many it might seem justifiable to warn even a supposed antagonist, like the Russians, about a perceived threat to blow up civilian airliners with weaponized laptop computers.
Some feel that the U.S. security services need an enemy of the stature of Russia to justify their own existence and massive budgets, hence all the anti-Russian propaganda stemming from the supposed hacking of Democratic Party emails and continuing demonization of President Putin and all things Russian.
But it’s not whether Trump is actually impeached or not that is most relevant. It is whether he can actually function as President with all these expressed doubts, and the possible impeachment process hanging over him. They are bound to impact adversely on his proposed legislative programs and, unless the anti-Trump factions back down, which they show no sign of doing, America will effectively have a lame duck Presidency which can only generate legislation that is in the interests of those pulling the strings – the "swamp" which, in theory at least, Trump so despises. Rather than draining the swamp, Trump may be being consumed by it.
Domestic instability — and seldom if ever has the nation been so divided as it is with the polarization around the Trump Presidency — could well trigger the much predicted bursting of the equities bubble, built up as it has been by the Fed’s easing programs. The Fed tightening, combined with the discord among the general public, is thus likely to see a move towards safe haven investing and a fall in the value of the dollar (which may already be occurring with the dollar index today hovering around the 97 mark, around five points down from where it was only a couple of months ago) as well as a fall in equities.
Gold and silver, the traditional safe haven investments, have been rising — silver faster than gold as we predicted a couple of weeks ago with the gold:silver ratio coming down from over 75 to around 73 at the time of writing, and may indeed be set to move down further back to 69 or lower where it was a month or so ago.
Asian gold demand remains strong — perhaps not as high as it was in 2015 – but is still seeing the greater part of global gold production moving from the traditional centers of New York and London to move into stronger hands in Beijing, Shanghai, Hong Kong, Mumbai and Singapore.
Gold ETFs, like GLD look to be benefiting, but they only move in parallel with the gold price itself. And at least direct investment in bullion, whether in coins or bars, does not expose you to counter party risk which has to be a consideration given that the major bullion banks, which hold the ETF gold, are potentially prone to collapse should then global economy turn sour again.
Gold and silver provide insurance against stock market and dollar collapse, and the current deep political divisions in American society, coupled with a shaky economy whatever the politicians may tell you, make the present a hugely opportune time to invest at least a portion of your savings in precious metals.