By Frank Holmes via Iris.xyz
The price of gold and gold mining stocks were very competitive in 2017. The yellow metal ended the year up a little more than 13 percent—its best year since 2010—while gold stocks, as measured by the NYSE Arca Gold Miners Index, gained more than 11 percent. All of this occurred even as large-cap stocks regularly closed at all-time highs and cryptocurrencies invited massive speculation.
We can thank the Fear Trade for much of gold’s performance last year. The Fear Trade, of course, is driven by low to negative real interest rates—when inflation erodes away at government bond yields—deficit spending, a weaker U.S. dollar and geopolitical uncertainty.
I believe these forces will only intensify in 2018. With inflation finally showing green shoots and President Donald Trump’s $1.5 trillion tax reform law expected to increase deficit spending, this year could provide the right conditions to spur gold prices higher.
The risks inherent in the Federal Reserve’s monetary policy tightening is a good place to start.
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