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Geopolitical Challenges of 2017

27 Jun 2018 - Archive

The world is a powder keg of geopolitical uncertainty, and precious metals demand rises as investors look to hedge against political and economic shocks in the coming months. Global uncertainty is concentrated in four major regions of the globe: North America, East Asia, Europe, and the Middle East. 



In North America, the key political issue remains Trump. After Trump's election, the market priced in positive expectations for his presidency, especially as it relates to tax reform and deregulation. Nevertheless, Trump has met stiff opposition from other members of the United States government. And it is unclear whether or not he will be able to fulfill his promises. 

If Trump's core economic plans falter - even a little bit- it could spell disaster for global financial markets. 

In Asia, the political tension surrounding the South China sea pits the United States and Japan against China. Further still, North Korea menaces the south with its nuclear weapons tests. These concerns are driving up bullion demand around the globe. 

In Europe, Brexit is a major political uncertainty that is slowly resolving. However, it remains unclear if the European Union will enact punitive measures against Britain and how the British economy will fare outside of the union. On the continent, populist political movements threaten the stability of the European Union. The biggest near-term threat is Marine LePen in France. Her party, the National Front, has an anti-EU stance. 

Meanwhile, the proxy war in Syria threatens to lead to a confrontation between the United States and Russia. As long as the region remains unstable, refugees and migrants may destabilize Europe. Immigration seems to be a driving force between European populism, and as long as the trend continues, the political situation will become tenser. 

Conclusion 

Geopolitical uncertainty will continue to be a key driver of precious metals demand in 2017 and onward. These factors will also affect the currency and bond markets of the United States and Europe.

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