There is a total misunderstanding of the role of gold and why it is so critical to own physical gold. Gold should not be bought or sold based on rumours or events. In connection with the US election, gold moved for totally the wrong reasons.
The whole Western world had forecast a Clinton victory. The Western media, which does no analysis but only reports what they are fed, spent no time trying to understand what the mood of the people was. It was exactly the same with Brexit. The elite in London, New York and the big metropolitan areas has totally different objectives to ordinary people.
Change in public mood
The trend change in public reaction, which we are seeing now, is not just a temporary phenomenon. Ordinary people are tired of a small elite of bankers, industrialists and politicians helping themselves to unlimited power and wealth whilst normal people are just getting poorer with lower incomes and more debt. And it is the masses which ultimately are responsible for repaying debt which is increasing exponentially in most countries. They will of course not repay the debt because they can’t. Instead, they will suffer immeasurably when global debt of around $250 trillion implodes leading to a severe depression. The gap between the rich and the poor in the West is wider than ever. In the US, the top 0.1% have 22% of total wealth. US top professionals have had an increase in real pay of 51% since 1973 whilst normal workers have seen a reduction of 4.6%. This is a very dangerous trend and when the economic downturn comes, it is likely to lead to violent protests and social unrest.
The Trump win was totally unexpected in the US as well as in other countries. Most politicians in Europe and around the world have ridiculed Trump and assumed that he would never be elected. They all certainly must eat humble pie now.
Investors must ignore paper gold volatility
Coming back to gold, we saw the most incredible volatility during last week. As the Trump victory became clear, gold went from $1,270 to $1,335 in under 4 hours’ overnight trading. Then massive selling of gold futures pushed the price down to $1,270 where it started before election. On Friday last week it was pushed down further to $1,225 which is $110 from the euphoric election peak. Initially, heavy paper speculative buying of gold took place around the world but very little serious physical buying. Some gold experts predicted that gold would go up by at least $100 if Trump won. Well, it did go up $65 but then declined over $100 from there. A dealer in London ran out of physical stock due to panic retail buying. But when the stock markets turned around from down 4-5% to up, the paper longs in gold were liquidated and speculative funds flowed into stock markets instead. Two years of gold production was traded after the election – all in the paper market.
