Trump’s Fickleness Is Dulling Gold’s Appeal, Deutsche Fund Says – by Luzi-Ann Javier (Bloomberg News – June 20, 2018)

Gold is failing in its traditional role as a haven in turbulent times, and a Deutsche fund manager has an explanation.

On Tuesday, as the deepening trade spat between the U.S. and China sent the S&P 500 index tumbling the most in a week, investors sought haven in the dollar, U.S. Treasuries and yen, overlooking gold. For Darwei Kung, a portfolio manager of the $3.3 billion Deutsche Enhanced Commodity Strategy Fund, the relatively higher transaction costs for bullion may be a contributing factor.

Abrupt changes in President Donald Trump’s policies, such as his alternating stances on North Korea, fuel speculation that his temperament toward tariffs on China could also change over the next few months, weakening the case for holding haven assets over a longer period, Kung said.

“People jump to gold if they really think that these geopolitical events will last,” Kung said in an interview at the Bloomberg headquarters in New York. Trump “has demonstrated already that he changes his mind very quickly,” he said.

That unpredictability “dulls the effect” on gold, he said. Take the case of yen. The bid-ask spread on gold is almost triple that of yen, making it more costly for investors to trade bullion.

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