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President Trump one month in: gold range-bound, Europe still edgy

Last updated: 09:30 26 Feb 2017 GMT, First published: 13:53 24 Feb 2017 GMT

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“Pace yourselves, folks, we’re only one month in!” - the words of Stephen Colbert, one of the doyens of the late night Talk Show scene in the USA, and as such a serious enemy of Donald Trump.

And it was a comment echoed in more prosaic form on this side of the Atlantic in analysis from ING’s Casten Brzeski.

In a note released earlier this week Brezeski highlights that the US accounts for around 10% of German imports. Add to that the 5% accounted for by the UK, and the populist wave sweeping the English speaking world looks all set to start rippling outwards.

How will Trump’s new protectionism affect German exports?

Hard to know but, as highlighted in this column some weeks ago, none of the top selling cars in the US are American-made. The question for Trump is this: what happens if manufacturing moves back to the US but no-one wants to buy the goods produced?

But the question for German policymakers in the meantime is how to plan for the turbulence ahead?

There’s the potential dent in exports from the disaffected Anglo-Saxons.

There’s the return of an economically and socially unstable Greece to the headlines. In France, Marine Le Pen’s Front National is on the rise. Le Pen herself made waves this week by refusing to don a Muslim headscarf on a visit a senior Muslim figure in Lebanon. That’s a stance Donald Trump would likely approve of.

And one wonders what the electorate in general makes of it in Germany, where more than a million mainly Muslim refugees arrived last year, boosting GDP, but also boosting the Far Right.

So if Trump’s election is now off the front pages, the bigger questions of his Presidency are now looming. Can he deliver on his stimulus spending? What does it mean for the wider global economy? And will there be any major foreign policy upsets?

At the German bank Berenberg, analyst Holger Schmieding takes up the baton from Stephen Colbert.

“Reflecting on one month of Trump, Europe is breathing a small sigh of relief,” Schmiedling wrote earlier this week. “It could have been worse. President Donald Trump has not confirmed the three major fears that he had raised with some of his campaign soundbites.”

These, said Schmieding, were the potential for conflict for China, the potential for the appeasement of Russia, and protectionism.

Sound and fury on all, action on none.

It’s in this context that gold has been tracking sideways. So much so in fact that one regular commentator on gold even gave up writing altogether.

“I am afraid I haven’t written Bullion Thoughts for a few days as quite frankly, no-one likes a broken record,” wrote David Govett, the Head of Precious Metals at commodities broker Marex Spectron.

“The gold market continues to meander aimlessly between US$1,220 and US$1,245 and has done so now for the last two weeks. The only moves are created on the back of dollar/10 year yields and tend to be headline-based.”

Another way of putting this is that the initial shock of Donald Trump’s election has worn off and that although the gold price remains sensitive to news, there isn’t much of it about at the moment.

Earlier this week Trump repealed guidelines on transgender bathrooms, more sound and fury, but also a sign that the big policy guns on jobs have now all been fired off.

“In essence, the market goes up and down and generally ends up where it started most days,” continued Govett. “It really is incredibly dull and we will need something big to happen for any of this to change.”

Something big may well happen. But it may not be in America where Trump has now appointed his first senior black official in the shape of Ben Carson and publicly condemned anti-semitism. True, there was talk of trouble in the streets, but the most meaningful dissent now appears to involve Stephen Colbert and Hillary Clinton’s tweets.

The next big thing perhaps not even involve America at all , if Trump is going to make friendly phone calls to the Chinese. German fears of appeasement of Russia have also been allayed by talk of shooting at Russian ships [https://www.dailymail.co.uk/news/article-4232694/Trump-good-politically-shoot-Russian-ship.html].

In fact, the next trigger for gold may come from far closer to home, either from an upset in the French elections or a breakdown of order in the essentially German economic fiefdom of Greece.

Time for Trump watchers to take five and put the kettle on? Who would dare?

 

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