Donald Trump Is Golden

| About: SPDR Gold (GLD)

Summary

The U.S. dollar is up strongly and the SPDR Gold Trust ETF is down 6% since the 1 st presidential debate.

Various factors deserve some credit for the U.S. dollar’s gains, but the presidential debate should not be excluded.

Hillary Clinton was generally anointed the winner of the first debate and rose in polls thereafter.

A Donald Trump presidency is perceived to present a higher level of uncertainty, which is detrimental to the dollar but golden for gold.

I see a good probability that a cornered Trump who gets back to atypical debating gains favor post the 2nd debate, which serves gold prices.

As the scandal unfolded on Friday evening and the media grabbed a hold of what would topple the average candidate for president, I could not help but to think to myself, Donald Trump is golden. Not only do I believe he will benefit from being cornered and forced to take the gloves off (his wheelhouse), but I expect he could win the election as a result of that. The U.S. dollar is up and the SPDR Gold Trust (NYSE: GLD) is down some 6% since Hillary Clinton was anointed the clear winner of the first presidential debate, I believe partly because of the fact that she represents a known quantity. However, Mr. Trump could now start to rise in the polls and/or win the election on the same atypical strategy that confounded political experts but did quick work of his impressive Republican rivals. Because of the uncertainty he is widely perceived to bring to the Oval Office, such a result is likely to weigh against the U.S. dollar and weigh for gold as/if he rises in the polls and in the immediate period post-election.

SPDR Gold Trust ETF stock chart

1-Month Chart of GLD at Seeking Alpha

Some of what has ailed gold since the first presidential debate is probably due to the apparent victory of Hillary Clinton in that first match-up. And as I scribbled this article on the eve of the second debate between the political rivals, most in the media, markets and up on Capitol Hill would probably say she is a shoe-in to win the second debate. In case you missed it, conventional political thought has Mr. Trump on the rocks due to fresh revelations from a scandalous "hot mic" conversation The Donald had with an entertainment show host years ago.

The price of the SPDR Gold Trust security has depreciated some 6% since Donald Trump and Hillary Clinton last faced off. The GLD ETF tracks the price of gold, and larger declines have been measured in further levered securities of metals and miners.

Precious Metal Securities

Change Since 1 st Debate -

Close of Trading 09-26-16

SPDR S&P 500 (NYSE: SPY)

+1.0%

PowerShares DB USD Bull (NYSE: UUP)

+1.0%

SPDR Gold Trust

-6.0%

Sprott Physical Gold Trust (NYSE: PHYS)

-6.0%

iShares Silver Trust (NYSE: SLV)

-10%

Sprott Physical Silver Trust (NYSE: PSLV)

-9%

Direxion Daily Gold Miners Bull 3X (NYSE: NUGT)

-40%

Direxion Daily Gold Miners Bearish 3X (NYSE: DUST)

+48%

Market Vectors Gold Miners (NYSE: GDX)

-14%

Market Vectors Junior Gold Miners (NYSE: GDXJ)

-15%

Goldcorp (NYSE: GG)

-14%

Newmont Mining (NYSE: NEM)

-13%

Randgold Resources (NASDAQ: GOLD)

-12%

Barrick Resources (NYSE: ABX)

-12%

Yamana Gold (NYSE: AUY)

-17%

Gold Fields Ltd. (NYSE: GFI)

-14%

Silver Wheaton (NYSE: SLW)

-18%

Coeur Mining (NYSE: CDE)

-11%

Click to enlarge

Now the severe decline in the metals and miners can be directly attributed to a sharp appreciation in the U.S. dollar during that same time span. Many factors could be given credit for the greenback's gains, including the announcement of an effective date for Brexit and the British Pound's sharp reaction to that. Also, we could point to the problems of Deutsche Bank (NYSE: DB), which has raised fear around European banks and the eurozone and so served the dollar. But I think we can also look to two issues in America that have helped the dollar.

The first is the increasing likelihood of a December Fed rate action. Despite the decreased trajectory for rates by the Fed's own estimation, it is becoming clearer by the language of Fed members and by economic data that the Fed is highly likely to raise interest rates in December. That serves the dollar versus relative securities and weighs against gold.

The second I believe is the advance of Hillary Clinton in the polls immediately after the finish of the first debate. With Hillary Clinton, markets seem to believe we have a known entity and more certain post-election economic, geopolitical and market environment. The market embraces certainty, though stocks have not necessarily reflected its existence. As a result, you can make an argument here, but only if assuming both markets react in kind and while ignoring the fact that various factors weigh differently for different securities.

With Donald Trump, the Republican nominee, we have a higher degree of uncertainty in some regards. We also have certainty in various respects. For instance, we expect regulation will decrease under a Trump presidency. However, because of some of the controversial statements of Mr. Trump through the long campaign, there are some concerns about trade and geopolitical relations with both allies and enemies of the State. This makes Trump golden for gold. Whether he is golden for the country or not will be determined by his actual actions post the election, and I'm not sure he'll be as scary as many believe.

Still, it is clear that general perception both here and abroad is that a President Trump brings increased and significant risk, at least for America and possibly for the world. I'll leave it to you to decide whether it's true or not, but that is the perception. So, if elected, the day after the election, I think we would see a drop in the U.S. dollar that would drive a strong surge in the price of gold. Gold would likely start to move higher with the polls as well if Trump starts to gain ground as I think he could. Foreign investors in our debt and other assets might decrease their allocation to the U.S., as the future and fate of the United States would seem less secure to some. That serves gold significantly, and precious metals relative securities.

Let me close with a bit of opinion on the pertinent driver of such a result, a President Donald Trump. During the preliminary nomination process, Donald Trump became a leader in the polls not when he seemed presidential or played by the rules of political correctness, but when he took the gloves off and made it personal. Since winning the nomination of the Republican Party, Mr. Trump has apparently taken the advice of media and others in his party to adopt their losing but gentlemanly strategy of fighting the politically correct way. Now that he's been dealt a few low-blows and is cornered, I expect his defensive and never-quit nature will have him resorting to what worked against the Republicans and what will work here as well. He will defend himself strongly and he will strike back fiercely and likely without an establishment filter. That is what led him to crush the impressive candidates who were expected to be quickly rid of him in the Republican Party, and it is what I think could help him win the election.

Donald Trump is golden for gold, especially if he wins the debate and rises in the polls toward winning the presidential election. I cover precious metals and the factors that move them closely and invite relative interests to follow my financial column here at Seeking Alpha.

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Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in GDX over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am an undecided independent voter.