All Roads Lead To Gold And Gold Stocks
Trump’s tariffs are bringing a Wall Street long-term bear market into play. Making it so that all roads lead to gold.
Initially the tariffs were pitched as being retaliatory that would level tariffs between America’s trading partners. Meaning if a country charged America a certain amount, then America would charge that country the same amount.
Plenty thought, even Trump supporters, that Trump would come out with a kinder gentler version of tariffs, not a worldwide trade war. Instead, he pushed all his chips into tariffs against every trading partner and started a trade war with America on one side and the rest of the world on the other side.
Trump thinks he has all the cards, and that he can bully everyone. Even the penguins on the Heard Island and McDonalds Islands, there are no people there to trade with on those islands, got slapped with tariffs. What are the poor penguins to do?
Instead of reciprocal tariffs, Trump and his team looked at the trade with other countries and went with tariffs that are meant to punish for trading imbalances and try to cause them to come into balance. The only way out it seems is that countries will be stuck with the tariffs until they trade as much with America as America does with them.
The Trump tariff tantrum is something that is impossible for many trading partners to comply with. The goal seems to be that countries have to buy as much from America as America buys from every trading partner. America is the largest economy in the world, it is not possible for poor countries to buy as much from America as America buys from them.
Trump’s team, and Trump himself, are messaging that these tariffs are here to stay and he isn’t going to back down. And the tariffs are not up for negotiation unless trading partners are willing to come up with phenomenal offers. In other words, it has to be America first and every trading partner last. In typical bully terms, it is a win-lose proposition, America has to win and everyone else loses.
I’m a capitalist that feels the world should be on a free trade playing field that lets the markets figure it out. If American companies and consumers want to buy from trading partners, it is up to them, not politicians in Washington.
Having politicians force companies and consumers to buy from others on the terms that politicians desire is anti-capitalist. I’m sure Trump supporters will say well what if other countries penalize American companies from moving into their markets.
In a true capitalist way, that is also up to companies and consumers to fix. If a country doesn’t want to open their economies to American products then the American companies and consumers should penalize them by voting with their wallets.
Either you truly believe in capitalism or you don’t. Trump and his team don’t as they think they can force other countries, and the companies and consumers in America to do it their way or the highway.
Wall Street has spoken with their feet and hammered stocks across the board. The DOW, S&P 500 and NASDAQ are spilling blood all over the street. They sold on the rumors of tariffs and on the news.
What could have been a fairly mild correction is now heading to a bear market that could be long lasting depending on how long Trump keeps his tariff tantrum going. China isn’t happy and they have come out with their own tariffs and are leaning toward holding back on sending key minerals needed for American made products and military products. They have clearly sent the message that they won’t be bullied.
Plenty of other countries are starting to look at trading with each other so they aren’t as dependent on America as a trading partner. Nobody wins in a trade war, especially when it is the biggest economy in the world against all its trading partners, but that is what Trump wants and is what he is going to get.
More accurately, I should say no country wins in a worldwide trade war, but gold does as do the gold miners.
Gold certainly didn’t need a worldwide trade war. There was already a Death Spiral of Debt made worse by the alarming increase in the cost of servicing the debt. Adding to the debt crisis in America and worldwide, the US dollar was weaponized and caused plenty of countries to increase their currency reserves to gold.
The debt and fiat currency system is broken, which is why gold is trading at record highs against every fiat currency. Gold is the second highest reserve currency and the US dollar has lost around 10% of its position as the leader in the past few years. Gold is the soundest money and it is becoming clearer to more by the day.
Mass deportations and tariffs cause the economy to slow and inflation to increase. There was already a growing stagflation problem during Biden’s term, only hidden by the phony economic numbers overstating economic growth and understating inflation.
Trump’s tariffs have the likelihood of pushing the economy toward a recession or even into one, while they will also cause inflation to increase. His mass deportation and tariffs are about to make stagflation something that nobody can ignore.
BRICS nations have already reacted to weaponization of the US dollar by buying gold. Now that Trump has weaponized trade, they will ramp up their gold purchases even more. Weaponization of trade is likely to bring Western nations into the gold market.
Since Trump made his tariff plans clear, stocks are in a big correction and investors are buying bonds. Buying bonds that are paid in a currency under pressure that looks to be heading much lower seems like a questionable strategy.
Especially when the US is in a Death Spiral of Debt, and unsustainable growth in the cost of servicing the debt, adding to the issue is that $9 trillion of debt put on with lower rates have to be rolled over to current interest rates.
With stagflation becoming a serious problem, a worldwide trade war was not needed, but here we are.
Gold was already in a perfect storm, it didn’t need stagflation and a worldwide trade war, which has made the storm even more perfect.
Investors worldwide will be well rewarded owning gold to protect themselves against all the issues above. Even better, what practically no generalist investors have figured out is that gold miners are making money hand over fist.
High-cost gold miners are making $1000 or more for every ounce they produce, the low-cost miners are mining gold for half or less of the cost of mining their gold.
Gold is the best parking lot for investors that want to protect their wealth and purchasing power. For investors that want to grow their wealth, the gold miners, as well as the gold mine developers with high-quality projects and explorers with important discoveries are the by far the best place to be putting their money.
Trump’s Golden Era is not good for Wall Street stocks, American companies and consumers, or deficits and debt, but it will be incredible for gold and wonderful for gold stocks.
All the best,
Allan Barry Laboucan
