Adem Tumerkan Blog | Clinton, Trump And Gold: Become Antifragile In A Fragile World | Talkmarkets
Editor-In-Chief at Palisade Research
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My name is Adem Tumerkan and I am the Editor-in-Chief of Palisade Research. 

I'm 26 years old. Born contrarian and skeptic. I like the mining sector but I'm really a contrarian/value investor that ... more

Clinton, Trump And Gold: Become Antifragile In A Fragile World

Date: Thursday, August 11, 2016 10:20 AM EST

I. Rate Hikes in an Election Year? Fat Chance

The Federal Reserve will not raise rates before the Clinton v Trump election. Raising rates, historically, almost always leads to equity prices falling.

GLDUSD

 

One year chart from today. The date of the Fed Rate Hike of .25% (vertical dotted line) and the price of the US Dollar Index (orange line) against the price of the GLD (blue line), a gold trust.

For example, when the Fed raised rates in December 2015, stocks had their worst drop in years to start 2016. Due to the strength of the dollar, China devalued their currency. This sent shock waves throughout global markets – just as it did in August 2015.

This was only relieved by Yellen sounding dovish, assuring markets that they will not raise rates as expected.

Thus, if rates rise, and when markets and asset prices drop – the democrats will take the flack. Just as George W. Bush took responsibility for all the woes of 2008, Obama will be blamed for this as-well. The average American does not even know who runs what is arguably the most important institution in the world. For all they know, it’s the executive and legislative branches of government creating these booms and busts. It is almost a certainty that if the economy plunges and rising borrowing costs further burden indebted middle Americans, the republicans will blame democrats and their policies.

II. The Mysterious Meeting Between Obama and Yellen No One Cares About

Eyebrows were raised when President Obama called an emergency meeting with Janet Yellen in April. Adding further speculation, the meeting was closed to the media. It is important to note that it is very rare throughout history for the President to ‘summon’ the Fed Chair suddenly.

Ahead of the afternoon meeting, White House Press Secretary Josh Earnest described Obama as “pleased” with Yellen, who he appointed to lead the Fed in 2014. It is the first time since November 2014 that the Fed chair has met with the president on her own. The meeting was closed to the news media.

Being ‘pleased’ with a Fed Chair or any of the central bankers and global Finance Ministers doesn’t mean much. Cutting rates, protecting asset prices from falling, backstopping big banks, allowing and servicing massive debts from bankrupt nations, and letting liabilities pile on. This doesn’t take an Ivy League education to accomplish.

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Kyle Soto 3 years ago Member's comment

"...against the price of the GLD (blue line), a gold trust."

Speaking of this gold trust, why is there a clause in the GLD prospectus that states GLD has no right to audit subcustodial gold holdings? Why would the organizations behind GLD forfeit this right and create this massive audit loophole? I haven't heard of a single good reason for the existence of this loophole so far. In addition to the audit loophole, GLD claims to be fully backed by physical gold bullion but yet it refuses to give retail investors the right to redeem for any of these ‘claimed’ gold bullion. I've read about and verified a number of other red flags as well:

"I remember CNBC's Bob Pisani visiting GLD's vault in a well documented segment. GLD's administration arranged this visit to disprove everyone claiming that GLD's gold did not exist. However, Mr. Pisani held up a gold bar with the following serial number - ZJ6752. This serial number did not appear on the most recent bar list during that time period. Cheviot Asset Management’s Ned Naylor-Leyland later found out that this "GLD" bar actually belonged to ETF Securities."

"Did anyone try calling the GLD hotline at (866) 320 4053 in search of numerical details on GLD's insurance? The prospectus vaguely states "The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody." When I asked about how much of the gold was insured, the representative proceeded to act as if he didn't know and said they were just the "marketing agent" for GLD. What kind of marketing agent would not know such basic information about a product they are marketing? It seems like they are deliberately hiding information from investors."