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Gold Moves Higher, Mining Stocks Hesitant

Gold equities hardly put in a stellar performance this week although the physical metal has been on a steady upward trend, suggesting a breakout above the $1300 level might not be far off.

Conflicting statements from Federal Reserve officials – not to mention Trump’s Treasury Secretary, Steven Mnuchin – continue to roil the dollar.  Adding to the overall mayhem, Trump’s almost daily comments about “fake news” sites came to a head this week with him banishing major news organizations including CNN, the NY Times and the venerable BBC of all things from a press briefing on Friday. (No confirmation yet as to whether Trump has removed Churchill’s bust from his office).

Among the major indexes, the Dow posted its 11th straight record and the S&P 500 its fifth straight weekly gain. The late day closes pushing the DOW into positive territory are starting to be quite predictable and any pullbacks are usually bought fairly quickly. Exactly how long this market euphoria will last is anyone’s guess, however, things could go negative very quickly when Trump begins to face resistance to his economic agenda.

Investors have been expecting massive fiscal stimulus, including investment in infrastructure projects such as bridges and highways which, given the country’s increasingly unwieldy debt load,
(not to mention resistance to increasing it by both Democrats and Republicans) might prove to be more of a pipe dream than reality.

Clearly the market’s 10% increase (Dow, S&P, Nasdaq and Russell) since his election has been predicated on him fulfilling his election promises. Voter’s naivety concerning the voracity of such promises never ceases to amaze and history shows that very few of them ever see the light of day. When that realization hits the marketplace, watch out below.

While overall markets tend to rise after a presidential election Harvard professor, Richard Zeckhauser, notes that “what is surprising about the post-election rally is its magnitude, and its sharp difference from the significant decline that most forecasters had predicted if Trump won the election.”

“Significant policy surprises, and significant changes in company stock prices, lurk in the near-and not-so-near term future,” he predicts.

Things seem to be going from bad to worse in the Euro zone, with some analysts expecting the euro to fall below parity with the U.S. dollar as growth begins to slow within its membership and Greece’s debt crisis raises its ugly head again.

The first round of the French presidential election will be held on April 23 with far right leader, Marine Le Pen, taking an early lead. Forecasters claim she stands to be beaten by a wide margin in the subsequent runoff but we all know how reliable such predictions have been in the recent past.

Le Pen proposes to close France’s borders and impose tough immigration controls, adopt its own currency, pull out of international bodies including NATO, and have a national policy that places France first. (Not that much different from the U.S. in fact).

That would likely spell the end of the European Union not to mention an upheaval in currency markets which is undeniably positive for gold and perhaps even the U.S. dollar which in the past has moved higher in tandem with gold.

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