Dow 20K? We’re Moving On Already

OK, can everyone just shut up about Dow 20,000 finally?

The Dow Jones industrial average crested the big round number for the first time this morning, minutes after the open. CNBC saw fit to send an alert to my iPad — in ALL CAPS, no less, to convey the magnitude of this development.

Never mind the Big Board is merely playing catch-up to the S&P 500 and Nasdaq, which posted record closes yesterday.

We won’t waste your time speculating about whether the renewed “Trump bump” this week can be sustained or whether we’re overdue for a pullback. You can read or watch that anywhere. Let the mainstream obsess about “the market”; we’re on the hunt for specific opportunities that can zoom higher during the Trump era no matter what the stock indexes do.

The hot money flowing into stocks today is flowing out of bonds and gold. As the markets closed, the Dow ended up at 20,068.

Treasury prices are climbing down, pushing yields higher; the yield on a 10-year note is back up to 2.5%. And gold has surrendered the $1,200 level, the bid $1,196 at last check.

Naturally, traders are keeping an eye on Trump’s latest executive orders — including the one for the Mexico border wall. Contrary to his campaign promises about making Mexico pay for it, the president now plans to use your money to build it and then send Mexico a bill for reimbursement.

Even if Mexico comes through with payment, we strongly suggest you don’t hold your breath waiting for a rebate on your income taxes. Heh…

“The main driver of the gold rally of 2017 will be a weaker U.S. dollar,” says Jim Rickards.

“After all, the dollar price of gold is simply the inverse of the dollar itself. A strong dollar means a lower dollar price for gold, and a weak dollar means a higher dollar price for gold. It’s that simple.

“Gold is money. The dollar price of gold is just another cross-rate like the euro-dollar cross-rate or the dollar-sterling cross-rate. The strong dollar was killing the U.S. economy through the loss of exports and export-related jobs. A strong dollar also imports deflation to the U.S. and is a major head wind for the Fed’s inflation goals.

“Investors are looking past the March 2017 Fed rate hike (highly likely, in my view) to a Fed that will probably have to ease monetary conditions with forward guidance by May. That easing means a weaker dollar and a higher dollar price for gold. Markets discount the future, so events likely to play out from May–September are being priced in today. The time to participate is right now, before the markets fully correct for the November-December 2016 drawdown.”

“There’s another factor driving gold higher, which is good news coming out of Europe,” Jim goes on.

“After the Brexit shock and the Trump shock, mainstream media decided more shocks were in store and began predicting nationalist, protectionist victories in coming elections in the Netherlands, France and Germany this year.

“Oops, wrong again. While the nationalists won in the U.K. and U.S., it appears the more conservative and centrist parties will prevail in European elections.” For instance, Marine Le Pen’s nationalist party in France is poised to pick up seats, but not enough to form a government.

Based on his extensive sources, Jim even believes Germany’s unpopular Chancellor Angela Merkel will emerge victorious in elections this September. “The result,” he says, “will be a stronger euro to satisfy inflation-phobic German voters. A stronger euro means a weaker dollar, which means a higher dollar price for gold. Everything’s connected.”

The bottom line is that the great 2017 gold price rally has just begun, and it’s not too late to get in on the action.

Kind regards,

Dave Gonigam
for The 5 Min. Forecast

The Daily Reckoning