A unusual positive catalyst for gold

Gold has been under great pressure in the past few months and we start to hear the doubts whether gold can hold up and continue to go up. This kind of depressing sentiment is by itself bullish for gold for the long term. You don’t see people feeling depressed or desperate when something is chasing by everyone but only when it is at its bottom when no one wants it. As I said, I’m a supper bull for gold for long term and I have laid out the fundamental reasons for it. Another potentially very positive development is a Change in Islam's Sharia Law that is planned on Dec 30, which may open up an enormous new demand for gold by Muslims. But today, I will lay out another potential positive catalyst for gold that you probably have never thought about. That’s the Trump effect.

Yes, Trump’s economic initiatives, if implemented, will be very much positive to the US economy, which could mean much higher inflation as the bond market has already started to reflect. A high inflation is generally positive for gold. But I’m not talking about this. What’s I’m talking about is Trump’s unpredictable temptation and his non-politician naïve experience in the world diplomacy. Let’s face it. Trump is a businessman, not a politician. He is used to deal with things using a businessman’s mindset. It works in the business world but he has not yet realized that now his counterparties around the world are the professional politicians and they will not follow his business mindset in dealing with state affairs and international relationship. We have and are still witnessing the developing drama related to his phone conversation with Mrs Cai, the Twain leader and follow up Twitting from him. Using his business mindset, it seems very logic to him to create some challenges for the opponent that could increase his barging power later. What he does not understand is that there is no bargain when dealing with sovereignty issues, especially with the Chinese leaders. The Twain issue is the most sensitive issue for China, for which no one can break the red line without severe consequences. Trump may think if he plays hard as his business negotiation, China will step back. No way! If he does not learn this quickly and still tries to push China too hard on this, it may very likely trigger a military confrontation he will regret to have caused. If you know some history regarding US-Soviet relationship, you must know there was a nuclear crisis, so-called Cuba missile crisis that put the world on the verge of the third world war. Think about a scenario: Trump continues to have governmental contact with Twain, an absolute taboo for China and China will likely announce to take military actions targeting Twain. This kind of confrontation will easily trigger a worldwide diplomatic crisis and who will be the beneficiary? Certainly gold! Of course, this is just an extreme example and I’m not suggesting it will happen. I’m sure Trump will quickly learn when he starts his presidency. But we may still very likely see many such kind of incidents during Trump presidency that may cause many tensions between the US and other countries, certainly not limited to China only.

I like Trump’s business acumen that may be very beneficial to the US economy but I’m not sure how fast he can learn about effectively dealing with diplomatic relationship with other countries with better controlled temptation and tendency to speak up his mind without constraint. It is a real possibility that his “Do as he pleases” (随心所欲)type of way may trigger many scary crises in dealing with other countries. That in a way will be very positive to gold!