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Gold Investors Eyeing Fractured Republican Coalition

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Gold prices have gotten a Trump bump this week following last Friday’s travel ban and the worldwide condemnation heard from foreign leaders and thousands protesting at US airports. Donald Trump’s first 11 days in office continue to demand investor attention, even as FOMC meetings begin today. Whether the Fed will raise rates is being overshadowed by speculations about immigration, fiscal spending, and an increasingly more divided Republican coalition.

The immigration ban also lead to a risk off move “across global financial markets, undercutting equities, including U.S. stocks,” while bolstering safe havens like gold, according to MarketWatch. Gold saw its best monthly performance since last June as stocks and the dollar begin to stall. Analysts are seeing the move as a “warning against complacency” for investors who’ve been focused on the upside of Trump’s fiscal agenda.

Gold investors are looking at other factors outside of the FOMC meeting this week. On Friday the nonfarm payroll numbers will be released, with a median forecast of 190,000 jobs added in January. However, last month’s numbers came in 22,000 jobs under expectations, and this month looks to underwhelm as well. The lackluster Q4 GDP of 1.9% reported doesn’t portend positive outcomes with respect to job creation.

While there’s plenty to consider with a Trump administration determined to upend the status quo, one major unknown for investors is the ongoing instability of the Republican coalition. An increasing number of Republicans are speaking out against Trump’s polices. Republican senators John McCain and Lindsey Graham have been vocal about their condemnation of Trump’s travel ban.

“The major risk looming now is the breakup of the Republican coalition,” explains XTM strategist Hussein Sayed. “Although this doesn’t seem to be the case for now. I believe it’s going to be the biggest risk to financial markets in the near future, as we end up with protectionist policies without the implementation of fiscal policies, thus triggering a sharp reversal in stocks worldwide.”

More recently, billionaire industrialists Charles and David Koch have expressed serious concerns about Trump’s fiscal stimulus plan. On Sunday at a Palm Springs retreat, Charles Koch told a crowd of wealthy donors, “We cannot be partisan. We can’t say, ’Ok, this is our party, right or wrong.’” The Kochs’ political and policy network has also pledge to spend as much as $400 million for the 2018 midterm elections.

That amount of money will certainly get the attention of Republican house and senate members looking for campaign financing in two years. “We have the courage to oppose bad policies that will only harm people’s lives, regardless of who proposes it,” stated Koch top aide Brian Hooks. “Remember: A trillion-dollar government stimulus was a bad idea under Democrats. It’s a bad idea when a Republican proposes it.” Hook went on to vow that the Koch network would “hold all politicians accountable, regardless of political party.”

If more Republicans break from Trump’s circle, there’s less likelihood that an approved Trump stimulus will look the same as the one promised during the campaign.

Investors have many factors to consider for February, but all signs are pointing to gold as a likely place many will look to for protecting their wealth during these uncertain times. Today, it’s easier than ever to buy gold and silver to protect your wealth and diversify your portfolio.

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