Halister News

(Bloomberg) -- Investors running diversified portfolios in the era of the Trump presidency may want to leave room for gold. In this new world, with a real risk of markets being shaken by surprise policy announcements (or errant tweets), a bit of hard asset protection is probably desirable.

• Some analysts will point to the threat of a higher dollar and rising U.S. yields as factors against gold. And that’s certainly been the direction of markets in the weeks since the presidential election. But gold now appears to be diverging from the broad performance of bonds, the dollar and equities.
  • Long-term support for gold is building in the $1,100 area; see chart here
• The argument that gold doesn’t have any yield is also less relevant when two of the biggest currencies on the planet -- the euro and the yen -- have negative short-term interest rates
• With the possibility of financial assets being sent tumbling by a Trump Twitter outburst, gold could be one of the last men standing when the next meltdown occurs
• Witness this week’s dollar sell-off after Trump said the dollar was too strong. It was probably meant as a throw-away line, but it still roiled markets
• Scary geopolitical headlines in the next four years are just as likely to come from Pennsylvania Avenue as they are from Pyongyang
• “Diplomatic conventions exist for a reason,” wrote Paul Donovan at UBS wealth management in a note to clients. Blunt diplomacy could provoke a reaction that unnecessarily increases the cost, he says
  • China is one of several nations with the ability, if provoked, to inflict pain on the U.S. via financial markets
• How to manage gamma risk in a portfolio could be an important skill in the Trump era. Owning a bit of yellow metal might not hurt either
• NOTE: Mark Cranfield is an FX strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.