Both Gold and Equities Have Solid Weekly Gains

Typically risk-on and safe-haven assets have a negative correlation. On most occasions, they tend to run in opposite directions. There are exceptions to that rule. The most noteworthy is the bull run of 2009 in which gold and stocks experienced dramatically higher prices. Both asset classes reacted favorably as a direct result of the initiation of quantitative easing by the Federal Reserve. This tandem run ended in the middle of 2011, with gold prices topping just above $1900 per ounce, and equities continuing to run higher, a trend that has continued to this day.

This week, both asset classes once again ran in tandem with strong gains in both. Gold prices gained roughly $20 a week, increasing 2.6%. The Dow Jones Industrial Average had its best finish since November of last year, gaining 3% on the week.

Strong Jobs Report Supportive of Higher Equity Prices

Both asset classes had stellar performances this week, with mixed data providing statistics interpreted as bullish for both.  Today’s jobs report revealed that over 227,000 new jobs were added last month, the largest increase in new job creation in the last four months. These numbers obviously demonstrate a robust economy characterized by steady growth. This data allowed the Dow Jones to finish solidly higher, gaining 177 points today, closing at 20,064.

Mixed Data is Also Supportive of Precious Metals

The data also revealed that the unemployment rate ticked up from 4.8 to 4.9 while wages moved to lower numbers. This data suggests that the probability of a rate hike in March has declined, and interpretation solidly supportive to safe haven assets such as gold.

President Trump’s Actions Add Fuel to the Fire

Gold prices also moved solidly higher this week, fueled partially by the increasing uncertainty factor surrounding President Donald Trump as he begins his vision to restructure the way business is done in Washington. His leadership style and executive orders have been perceived as both extremely needed and extremely destructive, widening the chasm between political factions here in the United States.

The increasing uncertainty factor has also put dynamic pressure on the US dollar, which closed dramatically lower on the week. Now for the fifth consecutive week we have seen the US dollar trade under pressure, moving to new weekly lows. The combination of uncertainty and a weak US dollar are the necessary ingredients to fuel a bullish rally in gold and maintain the increased momentum.

In only two weeks, President Trump’s new administration has begun the job of fulfilling many of his campaign promises through the use of executive orders. And true to his word, he has wasted no time in implementing his vision. However, it is this vision that continues to widen the chasm between political factions, resulting in a divided America. It is this division that needs to be addressed, and it is the responsibility of the president to unify our nation rather than polarized it.

Wishing you as always, good trading,