The Bottom is in for Gold

by JDH on July 22, 2017

Yeah, I know, I’m some guy who writes a blog every Saturday morning, the purpose of which is for me to keep track of my thoughts so I can remember my current strategy.  I have no greater insight than the guy next door, so why should my opinion mean anything?

It shouldn’t, but since you are here reading this, I’ll give you my thoughts on why I have exited all of my short positions in gold, specifically  JDST – Direxion Daily Junior Gold Minders Index Bear 3X Shares  and DUST – Direxion Daily Gold Minders Index Bear 3X Shares, for a small profit, and I am now back on the long side.  Simple answer: it’s time.

Gold is seasonally strong in the first few months of the year, weak in the summer, and then strong again in the Fall.  It would appear that the summer weakness period is ending, so now is the time to accumulate positions.

But it’s not just seasonality: it is also Donald Trump.

As we all know, President Trump wants to Make America Great Again, and that means bringing manufacturing jobs back to America.  To do that, he needs a low US dollar, to discourage imports and encourage exports.  So, a few weeks ago he had a chat with Canadian Prime Minister Justin Trudeau, and he said:

Here’s the deal.  I’ll stop squawking about renegotiating NAFTA if you raise interest rates to increase the value of the Canadian dollar.

Junior said, okay, the Bank of Canada raised interest rates for the first time in seven years a week ago, the Canadian dollar is strengthening, and the US dollar is weak.  Exactly as planned.

A weak US dollar is good for gold, in most cases, because it’s a store of value.  I don’t want to put my money in a diminishing asset (the US dollar), if I can put it in an increasing one (gold).  So, as long as this trend continues, gold should do well.

Speaking of Mr. Make America Great Again, the Democrats have leaked their slogan for next year’s mid-term elections: A Better Deal: Better Skills, Better Jobs, Better Wages.  This is not to be confused with Papa John’s Pizza (Better Ingredients. Better Pizza. Papa John’s).  When you have the best slogan-maker of all time competing against a bunch of rank amateurs, I don’t like the Democrat’s chances next year.

Yes, I know, he hasn’t built the wall, or fixed health care, or really done anything, but it’s all psychology, and at the moment he’s winning.

Go gold.

Thanks for reading, more next week.