Trump Impeached in the House! Is It Time for Gold Now? / Commodities / Gold & Silver 2019

Last week, the House voted to impeach Donald Trump. Thisis the third time in the U.S. history such an event has happened to the sittingPresident. What does it imply for the gold market?

Trump’s Impeachment,Explained

On Wednesday, theHouse of Representatives impeached Donald Trump. He became only the thirdU.S. president in history to be impeached, following Andrew Johnson in 1868 andBill Clinton in 1998.

According to the Constitution, the President “shall beremoved from Office on Impeachment for, a Conviction of, Treason, Bribery, orother high Crimes and Misdemeanors”. Democrats created two articles ofimpeachments which refer to these other high crimes and misdemeanors. The firstone accuses Trump of abusing his power by pressuring Ukraine to investigate Joe Biden, the former U.S. Vice President,in order to interfere in the 2020 presidential election.

The House ofRepresentatives also accused Trump of obstruction of Congress bydirecting administration officials and agencies not to comply with lawful Housesubpoenas for testimony and documents related to impeachment. The abuse ofpower article was passed on a 230-197 vote and the obstruction article waspassed by 229-198.

Trump denies any wrongdoing, calling the impeachmentinquiry a “witch hunt”. Who is right? Well, we do not know. We are neitherTrump’s supporters, nor Democrats’ fans - but let’s face it: the whole process is very political.Democrats are still furious after Hillary Clinton’s loss in 2016 and hateTrump. They hoped for several months that “Russiagate” would enable them toremove Trump from office, but it didn’t work out. So they are taking theirchances once more, although the WhiteHouse’s record of the call between Trump and Ukraine President isfar from being a clear case for high crime, especially when you compare it tothe Watergate scandal or Bill Clinton’s lying under oath about his sexualrelationship with Monica Lewinsky.

However, theremay be more to the story than politics and hatred of political parties. Wemean here the hostility of the so-called “deep state” or “intelligencecommunity” directed at Trump who is an outsider. Interestingly, even mainstreammedia started to notice that there is a real enmity between Trumpand agencies such as the CIA and the FBI (to be clear, we do not claim thatTrump is without sins, but that there is a kind of bias against Trump among theso-called establishment).

Anyway, impeachmentdoes not imply removal from office. No president has been ever removed fromoffice by impeachment and Trump is not likely to become the first one. Thatwould require a two-thirds majority in the Republican-controlled Senate. So, atleast 20 Republicans would have to join Democrats in voting against Trump toconvict him. This is unlikely to happen.

Implicationsfor Gold

What does the impeachments theater mean for the goldmarket then? The risk of impeachment should theoretically support the safe-haven assets such as gold.However, given the low odds of Trump being removed from office, the markets arelittle moved. The yellow metal also hasshrugged off the news from Washington, DC, as the chart below shows.

Chart 1: Gold prices from December 16to December 19, 2019

The price of gold has increased the following day, butit can hardly be called a rally. Having said this, the end of year is positive for the gold market, given theunfavorable environment. I mean here the fact that the phase one trade dealbetween the U.S. and China was signed, while the Conservative Party’s victoryin the UK parliamentary elections cleared the path to Brexit in 2020. As twoimportant headwinds for the global economy softened, one could reasonablyexpect that the price of gold would dive. After all, the risk appetite cameback to the markets, bond yields increased, while equity markets reached record highs. And yet gold remained in a narrowtrading range of $1,460 and $1,480. It seems that the yellow metal is preparing for a big move – now the question isin what direction (fundamentals suggest rather a decline, while the goldseasonal pattern favors an increase).

Chart 2: Gold True Seasonal Chartfor Q4 2019

Depending whether you are a bull or a bear, we wish you to be content withthe upcoming move!

We hope that you behaved well all the year and thatSanta Claus will not impeach you… Merry Christmas!

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Arkadiusz Sieron

Sunshine Profits‘ MarketOverview Editor

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