As Globalization Reverses, Will Gold Soar?

Globalization ReversesAccording to an article in The Economist several years ago, the contemporary trend of globalization has been with us at least twenty years. International trade and the exchange of knowledge, fueled by technology, have led us to believe we live in one world.
 
Most recently, we’ve seen this globalism trend undermined, if not starting to reverse. In addition to the familiar recurrence of terrorism and wars in the Middle East, we’ve seen Britain vote to exit the European Union. Prime Minister Theresa May looks upon the event as Britain’s opportunity to control future migration past its borders, and as the rejection of the European Court of Justice’s final word in the matter.
 
Needless to say, the Prime Minister’s position on the issue dovetails conveniently with President Trump’s new policy of stringent international trade relations. In a two-day meeting beginning Thursday, January 26, 2017, the two leaders hope to forge a separate trade pact for their respective nations – one which substantially reduces tariffs, and allows workers to move from country to country.
 
In general, though, their views about securing their respective countries’ borders are similar, and signal a marked trend towards de-globalization. Clearly, Trump will have a different meeting with Prime Minister May than the one he would have had with Enrique Peña Nieto.
 
The Mexican President, outraged as he is with President Trump, has publicly announced he will not capitulate to his demand that Mexico pay for a wall between the two countries’ borders which the new U.S. President plans to erect. The issue is serious enough to have compelled Nieto to cancel a meeting with Trump the morning of January 26th. And Trump has subsequently suggested that Mexico’s payment for the border wall take the form of a 20% tax on that country’s imports into the United States.
 
The trend towards reverse globalization extends beyond the leaders of the United States and Great Britain. Marine Le Pen, a conservative candidate for President of France, like Donald Trump and Theresa May, is an advocate of protectionism. She is also an opponent of the euro currency, and campaigns for France’s departure from the European Union.
 
In the upcoming March general election in the Netherlands, the radical-right wing Party for Freedom (PVV) led by Geert Wilders is currently ahead in the polls. Dutch parliament member Wilders has been labeled the “Dutch Donald Trump” for his opposition to grand-scale immigration into his country.
 
In Germany, although Chancellor Angela Merkel still has strong popular support, it’s noticeably weaker than it’s been in recent months. Merkel has publicly acknowledged it was a mistake for Germany to take in as many immigrants as it has in the past year.
 
With significant geopolitical risk weighing on Europe and the United States, it would be foolish for investors to bask in the current bull stock market without hedging their portfolio. A plane about to take off doesn’t wait for late arrivals. Neither does a gold market that could very well soon soar.
 
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