In recent years, inflation in official government figures has been virtually non-existent. In fact, the Federal Reserve and other central bankers around the globe have been valiantly trying to stimulate inflation to no avail.

The perfect storm may be brewing for 2017 and money velocity — the speed at which money changes hands throughout the economy — may be finally about to kick into high gear.

Markets Are Already Signaling Potential Inflation Ahead

In the wake of the surprise election of President Trump, the yield on the U.S. Treasury note surged from 1.77% before the election to 2.27% just a few days after the results were in this represents a startling rise in interest rates in a very short period of time. Bond-holders are dumping Treasury notes (the price moves inverse to the yield) as they anticipate inflation on the horizon.

Where Could The Inflation Come From?

One of the signature proposals by President Trump includes a $1 trillion infrastructure spending plan to rebuild the country’s roads, bridges and even airports. This plan is intended to create jobs and stimulate growth. Wage growth is good except too much of a good thing can quickly turn bad. Economists are already warning about the potential for inflationary pressures to rise quickly.

The increase in inflation could arise from several areas, not only the infrastructure plans. Another key proposal from the President includes repealing parts or all of the regulations imposed on the banking sector in the wake of the global financial crisis. Bank lending is expected to pick up as regulations are eased, which could help to stimulate inflation and money velocity.

How Does Gold Fit Into This Puzzle?

Gold slid lower in the days after the election in a “risk-off” type of financial trade. Stocks rallied in euphoria that pro-growth policies could lie ahead, which removed short-term demand for gold.

The gold price quickly found support in the $1,215 per ounce zone as emerging market buyers jumped in to buy physical demand at the lower price point, notably from China.

The lower prices in gold were viewed as a buying opportunity for long-term investors.

Western investors face a bevy of uncertainty ahead, including how the new Administration’s policies will truly impact the economy. Rising inflation remains a key risk, along with the potential for heightened geopolitical tensions. The President-elect has questioned at times the NATO allianceand also threatened to slap tariffs on China and potentially start a global trade war.

Gold has a solid track record as an inflation hedge, and an “insurance policy” against geo-political and economic uncertainties. The Chinese have rushed into the market this week at the lower prices points as they perceive gold around $1,225 an ounce as a bargain.

U.S. investors have the opportunity to build their hard asset allocation now at a better price point than three months ago. The 2016 uptrend in gold remains intact. It makes sense to use the price dip as a buying opportunity to diversify your portfolio against the uncertainty that lies ahead.

Call your Blanchard portfolio manager today to discuss the current outlook and options that may be right for you at 1-800-764-9135.

The day that was supposed to settle so many outstanding questions and anxieties about the future has arrived, and with it only more uncertainty. On this morning after Election Day, no one really knows what a Trump presidency will mean for the country, the economy or the financial markets. How will he govern? Can he handle the responsibilities of leadership on the global stage? Will he follow through on the promises he made throughout the campaign?

For many people associated with the financial markets, these questions only raise doubts about the future. If he is able to follow through on his proposals to cut taxes and increase government spending, the federal budget deficit is expected to grow. Redrawing trade agreements toward more protectionist policies will fall harder on the largest U.S. corporations who do much of their business beyond the national borders. This will of course weigh on stock values.

Prior to the election, a Trump presidency was projected to be good for gold. That may be a likely outcome, given all of the uncertainty that will accompany his arrival in the White House. As the leader of the worlds largest economy and greatest military force, Trump may challenge the long-established order of global alliances and cooperation among countries. But how much this order will actually change is clearly unknown at this point.

The immediate reaction in the global financial markets was shockin early Wednesday morning trading across Asian markets, equity market futures had plummeted and gold prices moved higher as the election results were announced. For many market analysts, it seems like Brexit all over again. That event may provide a good parallel for investorsmarkets will experience a snap reaction as investors absorb the news and re-align their expectations about the future, but eventually may revert to pre-election levels once emotion is washed out of the market.

There is a perception that geopolitical risks may escalate under a Trump presidency. These pervasive doubts and risks will work to keep investor anxieties high, which naturally benefits safe haven asset classes such as gold.

As we have stated many times over the past year, it is time to look at your overall portfolio and make sure that you have the right allocation of gold in order to protect your wealth during times of uncertainty.

While next weeks presidential election dominates headlines and stokes investor fears, recent economic reports continue to paint a placid picture of U.S. economic health.

 Last Fridays news on 3^rd Quarter Gross Domestic Product is a prime example. The initial reading for Q3 GDP came in at 2.9% annual growth, the strongest quarter in two years.

This favorable report helped raise the likelihood of a December Federal Reserve rate hike. The probability of a quarter-point increase at the Feds December 14 climbed as high as 75% in recent days, according to CME Group.

Beneath the surface, however, the economic waters are churning. That means gold should continue to shine for investors who are looking to diversify their holdings and preserve the value of their wealth from a possible severe market downturn.

While the headline growth number was strong and points toward a continuing recovery, not all economists were impressed by the report. The Wall Street Journal noted the robust GDP figure was juiced by several one-time events, including a jump in exports largely driven by a record soybean harvest.

Even with the boost in GDP in the Q3 report, the trend of economic growth remains anemic at best. Over the previous four quarters, the average annual GDP growth rate sits at a weak 1.5%. Earlier this year, many economists expected U.S. economic growth to be well north of 2% for all of 2016.

Whats holding the U.S. economy back? One factor has been consumer spending, a primary driver of U.S. economic growth.

Personal spending rebounded in September by 0.5% after a three-month slowdown, including a 0.1% decline in August. But consumers outlook about future spending, which depends largely on their prospects for work and income, has been on a steady downward trend as of late. The University of Michigan index of consumer sentiment hit its lowest point in two years this past October.

Then there are concerns about inflation. Septembers annual inflation rate was reported at 1.5%, the highest level in two years. That number largely reflects higher prices drivers were paying to gas up their vehicles during the month.

Perhaps more significantly, the Feds preferred inflation indicatorthe personal consumption expenditures index, which strips out volatile energy and food prices was steady in September at 1.7% on an annual basis. Thats below the Feds stated target of 2% annual inflation rate, indicating that a fair amount of price weakness remains in the economy.

Inflation expectations over the longer-term have swung higher over the past year, according to market indicators from bond investors. At a 10-year break even level of 1.74%, expectations for future prices increase are still well below long-term averages, but these indicators are much higher than where they were at the start of this year.

A major worry that investors and economists see in this mixed bag of data is a future of higher inflation without a corresponding increase in economic growth. Rising prices would be expected in a time of expansion. But in the absence of economic growth, higher inflation would be a sign of poor health in the broader economy.

Financial markets are right to show concern. A recent spike in the VIX index, otherwise known as the markets fear gauge mostly reflects anxiety over a Trump election victory as the GOP candidate shows surprising strength in the latest polls. On November 1, the VIX closed at its highest level since the Brexit-related market turmoil in June.

But fears about the strength of the U.S. economy also persist. The most recent reports reveal an economy struggling to fire on all cylinders. The U.S. economic engine appears to be running well at first glance. But a look under the hood shows potential warning signs that could stall the current recovery.

The sum of these fears continues to support strength in gold prices. The yellow metal continues to shine, even after a rise of 20% for the year-to-date. Once the uncertainty around the election is settled, there are enough concerns about the economy to hold investors attraction to gold for the near term.

Germany’s biggest lender reported an unexpected quarterly profit October 27. Despite the seemingly upbeat news, meaningful concerns loom large over the troubled bank as it continues to negotiate a multi-billion dollar fine with the U.S. Justice Department.

While this may seem very distant and far away, it could have direct ramifications for your portfolio in the weeks ahead.

Since hitting a peak in July 2015, Deutsche Bank shares have fallen more than 65 percent as confidence in the bank continues to crumble. Germany is traditionally home to stable economic policies and strong banks, which adds fuel to the current wave of financial system concerns.

The German lending powerhouse is mired in tense negotiations with U.S. Justice Department officials. The U.S. government has proposed a massive $14 billion fine in relation to Deutsche Bank’s mis-handling of mortgage backed securities during the 2008 global financial crisis.

The German bank reportedly has stated that it doesn’t intend to pay “anywhere near” that amount.

The negotiations have put stress on U.S.-German relations with some calling it a new “economic war.” The Washington Times reported that “the huge Justice Department fine is in fact retaliation by the Obama administration for the EU’s ruling in August that U.S. computer giant Apple must pay some $13 billion in back taxes over its operations in Ireland.”

A Mini Run on the Bank

A broad of array of questions continue to swirl around whether the German bank has enough available cash to meet its obligations. This has triggered a mini type of “run on the bank” as clients pull their deposits from Deutsche bank.

Clients have reportedly withdrawn billions of euros amid questions whether the bank has adequate capital to cover potential losses and meet regulatory requirements.

In this type of environment, gold tends to shine as a safe haven and a vehicle for wealth preservation for investors. Gold is a time-honored investment that investors turn to in times of market distress, bank uncertainty or potential financial system crisis.

The Deutsche Bank story is still unraveling and is far from complete. There are concerns that a $14 billion fine could cripple the bank. The International Monetary Fund said in June that the bank “appears to be the most important net contributor to systemic risks in the global banking system.” Rising risks about bank liquidity and financial system integrity only increase the attractiveness to gold and other precious metals.

Is Deutsche Bank The Next Lehman Brothers?

This brings back memories of 2008, the potential for a domino impact and a larger bank crisis. Deutsche Bank is a global bank with a deep reach into other financial institutions.

Could this become another instance of Too Big To Fail? German Chancellor Angela Merkel has not ruled out a government bailout of Deutsche Bank, but she hasn’t signaled her support for one either. This leaves many questions unanswered for investors.

Spillover from Deutsche Bank to globally systemically important banks

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Europe’s banking crisis is back. The integrity of Germany’s largest bank is at stake. The euro currency has been moving in tandem with Deutsche Bank shares in recent weeks. If the Deutsche Bank debacle turns into a domino effect the impact on the euro will be significant and it could trade significantly lower.

Deutsche Bank poses a major risk to U.S. stocks as well and equities could tumble if concerns about the banking system escalate. If this were to unfold, gold would likely surge as risk-averse investors pile into the safety of gold.

Consider now how well your portfolio is diversified? Are you hedged against the many risks that are rampant in today’s uncertain economic environment? Gold provides stability, wealth preservation and the opportunity for price appreciation and last but not least is an important component to effective portfolio diversification.

Gold has slipped off its 2016 highs, which presents a better value and buying opportunity for long-term investors. Global buyers of gold are already using the current price dip as a buying opportunity. Will you? Call us now and our portfolio managers can help.