Last week, it seems like the market is a little sick of this “Art of the Deal” cycle every time President Trump finds some new focus, but so far the “TACO Trade” has worked (TACO being an acronym for “Trump Always Chickens Out”) — buy when people panic about Trump pushing too far, then wait for the bounce when he backs off of his ridiculous stance in favor of something that’s just jarring, but maybe not completely insane.
Now that Greenland’s out of the way after Davos build-up, I guess we move on to worrying about the next big thing by Trump – Fed Chair again, Canada or any distraction, But it’s going to be a wild Spring and Summer, as we see new advancements every month in AI and as gold and silver continue to react to fears of more stimulus and more Federal debt sparking more inflation and a falling dollar. I can’t say I know how it’s going to work out, but these are the times when I take a deep breath and say, “at least diversify.”
And really, while we’re told that Trump has always thought of the S&P 500 or the Dow Jones as the “report card” for his presidency, and pretty clearly checks to see what the market reaction is to his various ideas and initiatives.
Anyhow, the big headline this week, though, is that gold and silver hit big new “round numbers,” with gold at $5,000/oz and silver reaching $100/oz for the first time (Last summer I wrote a blog on gold, to hit $ 5000 within a year and it did). That means, for those who pay attention to relative valuations, that silver has now made up for the fact that it was relatively undervalued, in gold terms, over the past dozen years or so, and with it taking bout 50 ounces of silver to buy an ounce of gold today, we’re back in roughly the average range the gold/silver ratio traded in for 20-30 years or so going into the last gold price peak (in 2012). Silver surged for lots of reasons over the past year, but one big reason is that it was cheap relative to gold, and that’s no longer true.
The danger, of course, is that it’s very easy to become accustomed to whatever the gold price is today, and to be too complacent about the expectation that it will remain high or keep climbing, so we don’t want to add too much of a bet that gold will keep surging past $5,000 to $6,000, $8,000 or above in the years ahead, even if we believe those higher prices make sense in this world of irrational government finances. But, on the other hand, nor do we want to be too aggressive and “take profits” and “sell winners”.
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