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Matthias Knab, Opalesque:

Sprott Asset Management writes on Harvest Exchange:

Following the Fed’s well telegraphed 25 basis point interest rate increase the market was surprised by the Fed’s more hawkish stance. Specifically, the Fed signaled three rate hikes in 2017, up from two previously. Surprisingly, these revisions occurred without a material change to economic projections and core inflation forecasts. It is important to note that financial conditions were already tightening pre-FOMC (incredible USD strength, inflation expectations surging, rising yields), dampening growth prospects and reducing the need for the Fed to tighten more aggressively.

Trump’s anticipated policies consist of considerable fiscal stimulus. Despite a lack of detail surrounding any stimulus plan, the market has already discounted a bullish outcome. A majority of Trump’s proposed policies appear to be highly inflationary. Considering the US is close to full employment, inflation pressures should be expected. The bond market has sold off in anticipation of this as nominal yields have increased at a faster pace than inflation expectations, driving up real rates in the near term – a negative for gold. In essence, the market appears to be discounting the negative implications of an aggressive fiscal policy faster than inflation expectatio......................

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