Why Trump’s Fed Picks Boosted Gold and ETFs



Gold prices

Gold prices were on a winning streak in June. The SPDR Gold Shares (GLD), the largest gold-backed ETF, rose 8.0% in June. GLD outperformed the S&P 500 (SPY) and the NASDAQ Composite (QQQ), which rose 6.4% and 7.4%, respectively. Gold outperformed risk assets, which touched higher highs. The outperformance implies bullishness for the metal. Read Gold Breached $1,400: What’s the Next Stop to learn more.

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The VanEck Vectors Gold Miners ETF (GDX), a more leveraged play on gold prices, gained 18.4%. Even more leveraged funds including the Direxion Daily Gold Miners Index Bull 3X Shares ETF (NUGT) and the Direxion Daily Junior Gold Miners Index Bull 3X Shares ETF (JNUG) returned 60.6% and 58.8%, respectively, in June.

Gold got a boost from Trump’s Fed picks

Gold prices fell back below $1,400 per ounce on July 1. Gold prices regained their luster on July 2 and rose 2.1% towards $1,435 per ounce. While the reduced risk appetite and geopolitical tensions motivated investors to turn to gold, President Trump supported gold prices. On July 2, President Trump nominated Judy Shelton to the Fed’s board. Shelton is an advocate of the gold standard. Last year, Shelton wrote that she supports pegging the US dollar (UUP) to gold prices. On July 2, GLD gained 2.0%, while JNUG and NUGT amplified those gains by returning 14.5% and 11.0%, respectively.

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As reported by CNBC, when Shelton was questioned in a recent interview with the Wall Street Journal if the Fed should lower rates, she said, “The answer is yes.” She also said, “If the appeal of cryptocurrencies is their capacity to provide a common currency, and to maintain a uniform value for every issued unit, we need only consult historical experience to ascertain that these same qualities were achieved through the classical international gold standard.”

Lower interest rate outlook supports gold

Since President Trump’s Fed nominees are expected to support his call for lower interest rates, gold prices got a major boost from the nomination on July 2. For gold prices’ next catalyst, all eyes will be on the US non-farm payroll data due to be released on July 5. Weaker data might prompt the Fed to go in for a rate cut in July, which would boost gold’s appeal.

Read Analysts are Turning Bullish on Gold: What’s the Upside? to learn why most of the analysts are bullish on gold’s price prospects in the medium to long term.


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