The Trump TACO trade is driving up the price of gold as central banks hoard bullion to hedge against the dollar | Fortune

"Perhaps we should not have been surprised.In what now looks like a well-worn negotiating tactic, President Trump yesterday did a complete 180-degree U-turn from his previous threats and said he would not use military force to invade Greenland, would not impose tariffs on European countries resisting a U.S. takeover of Danish territory, and would accept "additional discussions" instead.The markets breathed a big sigh of relief."

"Inevitably, traders piled into the " Trump TACO trade"-the notion that "Trump Always Chickens Out." The TACO trade (buying the dips when Trump says something scary and then enjoying the upside when he compromises) has been so reliable over the last year that some traders are worrying that the market will become complacent to Trump's more outlandish threats. The S&P has, in fact, performed worse"

"There is one set of financial institutions that is actively hedging against Trump's ability to inject volatility into global markets, and contributing to the dollar's fall as it does so: Central banks, which are hoarding gold. Traditionally, central banks have fuelled their reserves with the U.S. dollar. Although they still do that, they have also stepped up their purchases of gold. That is happening for two main reasons, analysts say. The first was Europe's decision to seize $300 billion in Russian central bank reserve assets"

President Trump reversed prior threats, saying he would not use military force to invade Greenland, would not impose tariffs on European countries, and would accept additional discussions. Markets reacted positively: S&P 500 futures rose 0.64% after a 1.16% gain, leaving the index up 0.44% year-to-date. Traders bought the 'Trump TACO trade'—buying dips after scary comments and profiting when he compromises—raising concerns about market complacency. The S&P has performed worse under Trump 2.0, and the dollar has declined 9% versus foreign currencies over the past 12 months. Central banks have increased gold purchases. Europe's seizure of $300 billion in Russian reserve assets reshaped perceptions of currency safety.

Read at Fortune