The Comey Effect

“There's something happening here. What it is ain't exactly clear” - Steven Stills

Trading off today’s intraday high of $1225.80, gold traders moved prices higher as they digested the most recent political  turmoil, the firing of FBI director James Comey. As of 3:30 Eastern Standard Time, gold is currently at $1219.20, up three dollars on the day for a net gain of +0.25%.

This safe haven play is based on the belief that the most recent action by the current administration is widening the divide that exists between the Democratic and Republican parties. It is hard to fathom that the greatly polarized chasm that currently exists between political parties could deepen even more.

However, it must be noted that the net effect of President Trump's firing of FBI Director Comey is muted, and any safe haven play based upon these actions has an uncertain outcome. The fact of the matter is, although gold is trading up three dollars at $1219, that price point is almost seven dollars below today’s intraday high.

The Dow Jones index is trading fractionally lower on the day. However, both the Standard & Poor’s 500, as well as the NASDAQ composite, are in positive territories on the day. In fact, the NASDAQ Composite is on track to close at a new all-time record high today, once again.

The rationale behind the restrained reaction from participants in the financial markets is, on the surface, bewildering. As reported by Sarah Benali of Kitco News, “Despite the surprise move by President Donald Trump to fire FBI head James Comey Tuesday, the gold market is unable to attract any major safe-haven demand.”

Quoting financial commentator Jim Cramer, “The reason gold hasn’t moved higher is because the issue is not considered a “constitutional crisis.” “You know what, if this is a constitutional crisis, gold should be flying,” he told CNBC’s “Squawk on the Street” on Wednesday. “If this is a constitutional crisis, the S&P should be down a percent and a half.”

Make no mistake, the most recent actions by this administration have not been fully digested and, more importantly, factored into market sentiment and pricing. The fact of the matter is that President Trump came to his decision to fire the FBI director just as the director was asking for additional funds and manpower to continue the FBI’s investigation of Russia and the current administration.

Chuck Schumer, a clear opponent of this administration, commented on this most recent action saying, "Every American will rightly suspect that the decision to fire Director Comey was part of a cover-up," unless an independent investigation takes place, Schumer told reporters on Tuesday evening.

Whether the presidential decision to fire Comey was an absolute coincidence in timing to the current investigation, or a blatant attempt to stifle the truth, the repercussions of this action is yet to surface within the markets.

Wishing you as always, good trading