Trump's win of the presidency is now official.
I've been joking that he's already ordered another "Trump Tower" sign, this one to be installed on the White House. And then... he'll have it painted gold.
All joking aside and, love him or hate him, I think the Donald is going to end up being very good for gold prices in 2017.
As news emerged that Trump's lead was likely to stick, gold prices exploded higher to the tune of about $60 in a matter of hours. But by late afternoon the following day, nearly all of those gains had evaporated.
For gold stocks, the story was similar. But my view is this is just a temporary reprieve, one that's an opportunity to buy gold at a temporary discount.
Trump's policies are going to be great for gold for a number of reasons. In fact, we already have some proof of this in the immediate aftermath, given how certain sectors are reacting.
Let's look at what you might expect from gold prices in 2017 with Trump as the new president, and why gold is almost certain to be considerably higher a year from now.
What Trump's Plans Mean for Gold in 2017
One of the most often repeated promises Trump made during his campaign was that he'd massively boost infrastructure spending.
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In his first address as president-elect, Trump said, "We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals. We're going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it."
He's indicated he would spend more than $500 billion on infrastructure and provide up to $137 billion in tax credits for private companies that spend on such projects.
By some estimates, that could create a boost in GDP and help create as many as 200,000 jobs in the initial years.
But infrastructure spending will lead to bigger deficits, meaning still more borrowing by the federal government, adding to its already massive $20 trillion debt load.
All that additional money printing and spending is likely to lead directly to higher inflation. And the price of gold should thrive under those conditions...
Our Newest Prediction for Gold Prices in 2017
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Trump has said the strong U.S. dollar is a problem. In some ways, he's right.
That's because the strong dollar makes U.S. exports more expensive. That means foreign buyers will buy less or look elsewhere for substitute products at better prices.
Another major disadvantage is when U.S. multinationals sell in foreign markets and book revenues in those currencies, those sales are worth less when converted back into a strong dollar. And that means lower profits.
So a weaker dollar would help on both of those fronts.
If Trump manages to "talk down" the dollar by creating the expectation that it will fall, and by increasing the debt through still more borrowing, then a weaker dollar is the likely result.
A weak dollar also stokes inflation, because many goods imported into the United States will then cost more.
Nonetheless, it's also good for gold prices in 2017.
When the dollar is relatively weaker, it takes more dollars to buy the same quantity of gold. So the price of gold rises. That's something I'd expect to see happen.
An additional sign that inflation has in fact already begun to take root is the reaction we've seen from long-term bonds.
Since July, the 10-year and 30-year Treasury yields have been heading distinctively higher.
Interestingly, in the last few days, and especially in the immediate aftermath of the election, the 30-year yield exploded higher.
That signals the market senses inflation is rising. Higher rates like this mean long-term bonds are being sold at increasing discounts to make up for their low yields.
And the large 11.5% jump in just two days after Trump's election points strongly toward even higher expectations of increasing long-term rates, and therefore inflation.
But don't let higher long-term rates scare you if you're bullish on gold. They mean inflation is coming, and we know inflation is gold's best friend.
I think during Trump's first year in office, we could see gold climb back to reach $1,600. And that's likely to be just a modest start towards much, much higher prices.
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