Gold is suddenly looking toppy, as prices are struggling big time to take out resistance at $1220/OZ levels. The resistance was established on January 17^th and has remained intact since then.

But the technical failure is not the only reason for gold looking toppy. What could be bothering gold bugs is the fact that ‘Trump is delivering what he promised’.

‘Trump walks the talk’

Let us take a brief look at Trump’s executive actions so far-

• Withdrawal from TPP (Asian trade deal)
• Speeding approval of Dakota access & Keystone oil pipelines
• All pipelines to be built or repaired with American-made materials
• Federal hiring freeze
• Regulation freeze
• Affordable Care Act rolled back
• Speeding up environmental reviews for all priority infrastructure

What’s so special about these orders?

It has been observed that Election candidates ‘overpromise to under deliver’. Most Presidents, after entering White House back-off from ‘soft promises’.

However, Trump is delivering… and is delivering on tough/hard promises, which suggests he would have little problem in delivering popular promises like infrastructure spending/fiscal stimulus.

TPP withdrawal, though a symbolic move is a clear sign that protectionism is going to be the name of the game under Trump Presidency.

The speedy approval of the Dakota access & Keystone oil pipelines is another example, which suggests ‘Trump won’t stop being Trump’ just because he is President now.

Protectionism is bad, but…

One may argue that protectionist policies are bad for the global growth. However, protectionism coupled with fiscal stimulus in the US would be net positive for the US economy. Inflation could spike, thus forcing the Fed to hike rates at a faster rate.

Also note that other nations could see export-led growth to some extent (despite Trump’s Buy American, Be American stance) if the fiscal stimulus is successful in boosting the domestic demand in the US.

Moreover, Trump’s quick action in the first few days has heightened expectation that he would deliver on popular promises- fiscal stimulus, infrastructure spending.

US Equities/risk assets are thus more likely to scale new heights at least during the first six months of Trump Presidency.

Hence, it is safe to assume that gold looks toppy at least for the near-term.

Let us look at the charts, which also suggest a potential for a downside move

4-hour chart

The above chart screams a short-term top could be in place around $1120/Oz on account of-

• Bearish price-RSI divergence
• Double top reversal

A breakdown of support at $1195.923 (confluence of neckline and the rising trend line) could yield a sell-off to $1176 (daily 50-MA).

Monthly chart

• The 50-MA has topped out and is sloping downwards
• We also see bearish 5-MA and 10-MA crossover
• Prices failed multiple times in 2016 to take out the four-year long sliding trend line

To conclude, the metal appears to have topped out in the short-run and a break below 50-DMA would signal the larger down trend has resumed.

On a larger scheme of things, bearish invalidation is seen only if prices take out the descending trendline seen on the monthly chart.