Everyone is trying to figure out what Trump means, for stocks, gold, immigrants, trade deals, international relations, taxes, regulations, rates, the Supreme Court, racial tension, and most other things that matter in America. Last weekend’s Metals Investor Forum was no exception.

Trump was the topic on everyone’s lips. The discussions helped inform and advance my outlook, though I’m the first to say that it’s still far too early in this change to be certain about much.

Long term, the bull argument for gold remains very strong, grounded in negative real rates. Real rates, calculated by subtracting inflation from nominal rates, are the interest rates we actually feel. Right now nominal rates are extremely low at 0.4% Inflation is also low, but at something like 1.5% it puts the real rate of interest in America into negative territory.

That was the driving force behind gold’s gain this year. Yes, in discussion people usually focus on gold’s value relative to stocks or its cyclicality or its security in a world of debt or its safe haven-ness in a world of political and economy uncertainty, but these arguments only make sense in a negative real rate environment.

Negative real rates mean you lose value to inflation if you hold cash or bonds. As the only ‘currency’ immune to inflation, gold does not suffer so and thus becomes the obvious choice for investors seeking security.

Of course, the world’s massive monetary experiment and ultra-low nominal rates since the financial crisis put a twist on things. Real rates have been negative, but only barely so because both parts of the equation – nominal rates and inflation – have been so low. And ultra low interest rates fuelled a stock market rally: it has not paid to hold cash and bonds, so investors turned to stocks, where gains were aided by cheap debt that enabled corporations to buy back their own stock.

Low interest rates had another important impact: they made servicing the US debt vaguely reasonable. Last year the US spent over $400 billion servicing its $20 trillion in debt.

If interest rates rise from 0.2% to 0.4% - still ridiculously low in a historic context – debt servicing reaches $800 billion. A 1% rate creates $2 trillion in annual debt servicing costs. That is immense.

In her last news conference Fed Reserve Chair Janet Yellen suggested it might be a good idea to let the economy “run a little hot” to encourage the sluggish recovery. What she meant was letting inflation get ahead of interest rates – rather than raising rates to keep inflation in check, it might be better for the economy to let inflation get ahead of rates.

It would also be better for the US government. Way better.

Inflation devalues that $20 trillion debt. It is the counter to rising rates, which make servicing the debt so expensive. If Trump were in charge of the Fed, we’d have ultra low rates for his entire term so that he could add to the debt without worry, while also continuing to give companies and people access to free money.

But inflation is only your friend for a little while. And encouraging inflation is a dangerous game because it can suddenly take off. People may have qualms with money printing and bond bubbles and stock buybacks fueled by cheap debt, but those concerns are nothing compared to the panic when inflation devalues their hard-earned dollars.

Inflation is already rising. Trump’s seemingly key economic policies – military and infrastructure spending, corporate tax cuts, domestic energy, deregulation – are inflationary. Heck, economic growth is inflationary. And it’s all especially so if it is fuelled by debt, which is Trump’s plan.

Inflation is coming. Nominal rates will not keep up, to encourage growth and to keep the debt manageable. The result: negative real rates.

This fundamental rationale keeps me fully gold positive in the long term.

The challenge is the short term.

Inflation will not take off tomorrow. Right now, what we are seeing is a market that is optimistic Trump will be good for the economy. That means stocks are performing and the US dollar is rising. Both of those work against gold.

More generally, the notion is setting in that a Trump presidency represents a Risk Off trade. That’s a big tough to wrap my head around, given the deep divisions he has sowed in his party, given his unpredictability and political inexperience, and given that his ascension represents a changing of the guard (almost always bad for stocks) when markets are already six years into a bull run.

Nevertheless that is what is happening right now. And Risk Off momentum is, of course, also bad for gold.

So right now I see further downside pressure on gold in the short term. The pressure sits against a bullish long term, but it is there nonetheless.

What should a gold investor do?

Hard to say, but there are some guidelines.

• If you are up on positions that are likely to move mostly in response to gold over the next three months (in particular gold producers of all sizes and precious metal royalty/streaming companies), you could consider selling now to buy in lower when that opportunity materializes. Of course, there is risk in that. Regardless of the seeming rise in the US dollar and markets in the near term, we don’t know that gold will decline from here. Even if it does it is very unlikely that it would retest its lows from this time last year. As such the potential price move is limited to about $150 or 12%. A move of that size ahead of a likely bull run is not really worth trading – but equities, of course, leverage gold’s moves. Miners and royalty co’s could move 30% down or more if gold were to lose 10%. A 30% move is worth trading…if it happens.
• The decision likely rests with three factors: your affinity for trading, your cost base, and your timeframe. Leverage-to-gold positions that you entered more recently are probably even or down. No point selling those; put them aside until we get through the near term. Positions you established early in 2016 likely still have good gains. Those are better bets if you want to play the downside opportunity: sell to lock in profits and redeploy close to Dec. 14, when the rate hike is underway and the Trump effect has had a month to strengthen the greenback and hurt the yellow metal. Playing the downside opportunity at all depends on whether you are a trader – buyers with long term horizons can just hold, perhaps adding to favorite positions if they weaken notably.
• There are likely stocks you liked through the year, but felt you missed when they ascended beyond your reach. There will be renewed opportunities in the coming weeks and months.
• Exciting exploration news will still get rewarded. Not to the same extent that it does in clear bull market, but there will remain many who believe (like me) that this is a correction within a bull move and thus will buy into exploration success.

Clear as mud? I wish I had more confident advice, but it is still too early to know. Gold has stabilized so far this week, which is great. Bond yields have continued up, holding their Nov 10th gains and then adding some, which suggests the market is concerned about government debt under Trump. At the same time the greenback continues to rise and markets are also holding their gains.

The post-election market was crazy. Bond yields are not supposed to rise when gold is falling, for example. And the size of some of the moves, like the USD moving 1.5% in a session, was historic. Now we’re in the shake out phase, where the market stops reacting for the sake of reacting and starts looking for reasons. Until those reasons emerge, it’s impossible to know what the next three to six months hold for gold. The optimist in me wants to believe that January seasonality combined with the uncertainty of the inauguration and the duration of gold’s correction will set the metal up for its usual January-April rally, but US dollar and market strength could disrupt that. The silver lining, so to speak, is that if gold does come off farther from here, the rebound when it comes will be that much stronger.

In this context, with the short-term outlook for gold uncertain, I’m holding off on new recommendations for a little while. Entry points matter and I expect better ones could emerge over the next month.