For some time I’ve expected 2018 to be gold’s breakout year. Although it is still possible, the odds have declined severely.

So what happened? Well, many factors influence the price of gold – interest rates, inflation expectations, currencies wars, monetary policy, stock market trends, investment demand and consumer sentiment to name a few. Right now big money prefers US stocks, and it’s hard for gold to compete with high flying tech stocks.

The Trump Effect: I think I can safely say the majority of gold challenges stem from Trump. The economy was rolling over into a recession in 2016 (see below) and gold responded positively. Prices bottomed at $1045 and rallied to $1377 by July of 2016. However, everything changed when Trump got elected. The economy began to recover, and his tax policies are extending the business cycle. We would have continued into a recession and gold would be much higher if Hillary won the election, I believe. Click here for earnings link.

Now, this doesn’t mean gold is dead – it’s just out of favor for the moment. I think the “Trump Effect” merely postponed gold’s breakout by 1 or 2 years. The business cycle is still very mature, and earnings will probably begin to slip again next year. The yield curve is nearly inverted and that almost always precedes a recession. More on that later.

However, I believe the primary driver behind gold is consumer sentiment. Right now the average guy isn’t thinking about gold. The stock market is making new highs, wages are up, inflation is modest, and unemployment is at multi-year lows. He couldn’t care less about gold. Don’t believe me? Ask some ordinary people what they think the price of gold is. If they are within $200, I’d be amazed…some will be off by $1000 or more.

Like him or hate him Trump has been good for the US economy, and that’s made it difficult for gold. To lift prices out of the gutter, we need an economic slowdown (next year), major political event or financial crisis. Gold will catch a bid once consumer sentiment enters a new downtrend. The bureaucrats are trying to seize power back from Trump. If they’re successful and throw him out of office, gold will soar.