Should you 'Trump-proof' your portfolio with Gold Shares?

Shares are falling, but gold is rising as markets fear a Trump presidency.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It's been a rough week for investors, unless you're up to your neck in gold shares.

Investors have endured plenty of volatility in recent sessions as markets around the world brace for a possible Donald Trump presidency. While shares have been taken to the cleaners, the spot price of gold has rocketed higher.

One factor driving the gold price higher has been a weaker US dollar. As the precious metal is priced in US dollars, a weaker dollar makes gold cheaper for foreign buyers which can result in an increase in demand.

However, demand for gold typically also increases as a result of fear and uncertainty, which is exactly what investors are feeling as the probability of Trump winning next week's election steadily increases. One ounce of gold is now fetching US$1,305, up more than 1% since yesterday, and a significant improvement on the low of around US$1,248 struck as recently as October.

Here's how some of the gold miners have performed since the beginning of the week…

  • Beadell Resources Ltd (ASX: BDR) up 0.6%
  • Regis Resources Limited (ASX: RRL) up 7.4%
  • St Barbara Ltd (ASX: SBM) up 3.9%
  • Evolution FPO (ASX: EVN) up 8.5%
  • Newcrest Mining Limited (ASX: NCM) up 6.7%
  • Northern Star Resources Ltd (ASX: NST) up 5.3%

One of the few exceptions is Independence Group NL (ASX: IGO). Its shares have fallen 2.1% this week. Otherwise, those gains compare to a 1.3% decline for the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) over the same period.

Before investors get too excited however, there are a couple of factors working against gold. First up is the probability of an interest rate hike from the US Federal Reserve in the near future – most likely in December. A rate hike would most likely act to strengthen the US dollar, whilst also providing investors with a greater incentive to keep cash in the bank (which earns interest), as opposed to gold, which yields nothing at all.

The second major factor working against the price of gold is history itself. As gold tends to rise in price as a result of fear and uncertainty, it also tends to fall when calm starts spreading through the market again. Whatever happens in the US election next week, volatility will eventually pass which would likely weigh on the gold price in the long run.

Given the number of high-quality businesses that have been sold off in recent sessions, I believe investors could do a lot better by searching for a few bargains that are outside of the gold sector.

Motley Fool contributor Ryan Newman has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »