What “Liberation Day” Means for Gold

Clarity is bad for the gold market. And, as we kick off “Liberation Day,” the financial markets may finally get a good dose of clarity.

President Trump has declared today “Liberation Day.” The United States will impose tariffs on imported products. But, the size and recipients of those tariffs has been undefined.

Of course, the vague instructions have created a good deal of chaos and uncertainty in the financial markets. That explains the weakness in just about all market sectors. For the most part, stock market investors don’t like uncertainty.

So, they’ve been selling stocks.

On the other hand, gold and gold stocks tend to perform best in chaotic and uncertain environments. They’re defensive. And, when it looks like the world is about to end, investors flock to gold.

That is indeed what has happened ever since President Trump first spoke of imposing tariffs on imported goods. Gold is up 12% since the inauguration. The Gold Bugs Index (HUI) is up 20%.

Admittedly, I have been on the wrong side of that trade.

Several times over the past few weeks I’ve written bearish articles on gold and gold stocks. Indicators that had proven reliable for years were pointing to a decline in the gold market. And, as much as I am a long-term gold bug, I was willing to bet on a short-term decline in the gold sector.

I Got It Wrong

Technical indicators are no match for chaos and uncertainty.

Today, though, that chaos and uncertainty is lifted. We’ll find out who is subject to new tariffs, and how much those tariffs will be. We’ll also likely hear from other countries how they’ll deal with the new environment.

In other words… Liberation Day should prove to be a day of clarity. And, as I wrote above, clarity is bad for the gold market.

So, maybe today is the day the previously reliable bearish technical indicators for gold finally have their day in the sun.

That doesn’t mean investors should sell all their gold and gold stocks. The long-term picture is still quite bullish.

But, the gold sector has enjoyed quite a rally over the past two months. Traders should at least trim some profits from long positions, and raise stop prices on the balance.

Aggressive traders might even consider taking a bet on the short side.

Folks looking to buy into the gold sector should be patient. We’ll likely have a chance to do so at better prices in the weeks ahead.

Best regards and good trading,

Jeff Clark
Editor, Market Minute