Should We Declare Emergency For Gold?

Sixteen states sue Trump over border wall emergency. Is it good or bad for the yellow metal?

Trump’s National Emergency and Gold

On Friday, President Trump declared a national emergency to obtain funds for building a wall along the U.S.-Mexico border, which was his key promise during a campaign. According to the President’s proclamation :

the current situation at the southern border presents a border security and humanitarian crisis that threatens core national security interests and constitutes a national emergency.  The southern border is a major entry point for criminals, gang members, and illicit narcotics.

Trump declared emergency despite the fact that Congress allocated nearly $1.4 billion toward border fencing. However, the order would give him an additional $6.7 billion. The national emergency is nothing unprecedented. Every U.S. president since 1976, when the National Emergencies Act was signed off, has declared at least one national emergency.

What is new is that Trump admitted that there is actually no emergency. As he said on Friday, “I could do the wall over a longer period of time, I didn’t need to do this, but I'd rather do it much faster.” When we checked the dictionary last time, ‘emergency’ meant “a serious, unexpected, and often dangerous situation requiring immediate action”. And what does data say?

Let’s look at the chart below. It displays the US violent crime rate, i.e. the number of violent crimes (which is composed of four offenses: murder and non-negligent manslaughter, rape, robbery, and aggravated assault) per 100,000 inhabitants. Although there is indeed an increase since 2014, the rate remains historically at a very low level. This rate declined from 758.2 in 1991 to 382.9 in 2017. Our chronicler’s duty is to note that we do not see any correlation between the violent crime rate and the gold prices.

Chart 1: US violent crime rate (blue bars, left axis, number of crimes per 100,000 inhabitants) and gold prices (yellow line, right axis, London P.M. Fix, in $) from 1986 to 2017.

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If you enjoyed the above analysis and would you like to know more about the most important macroeconomic factors influencing the U.S. dollar value and the price of gold, we invite you to read the ...

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