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Gold $1325.3 -11.7
Silver $16.62 -0.56
Talk to a representative: 855-242-4121

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Stock Market Tanks, and Gold JUMPS Based on False ABC News Trump Report

On the morning of Friday, December 1, ABC News investigative reporter Brian Ross broke a story that quoted an unnamed source as saying former National Security Advisor Michael Flynn had been directed by Donald Trump to “make contact with the Russians” during the 2016 presidential campaign. The implications of such a revelation, in the context of ongoing concerns over alleged Russian collusion in the 2016 election, surely would be enormous. The financial markets clearly considered it to be important news. In response to the report, various equities indexes endured something of a flash crash, with the Dow Jones Industrial Average tanking about 1.5 percent in a matter of minutes, and the Russell 2000 small cap index dropping over 2.5 percent in just a half-hour. As for gold, it jumped over 1 percent during the day.

To make matters worse, it turns out the report was not accurate. Ross later corrected the information he broadcast earlier, saying during Friday’s evening news that, according to his same source, Trump’s directive to Flynn about making contact with Russia came after the election, when he was president-elect.

While most see the inaccuracy of Ross’s initial report as the central issue here, investors would do well to take another lesson from what happened Dec. 1. Namely, that the great volume of accessible news, combined with the lightning speed at which it now travels, means information’s capacity to significantly impact the financial markets in just a matter of seconds is tremendous. And so preparedness is everything.

Obviously, it’s of the utmost importance that the news we receive be true and accurate. But the markets thought Ross’s report was true, and look how quickly, and how drastically, they reacted to it. True or untrue, reports of this sort from ABC News and other giants in the information industry can send shockwaves through financial markets in mere moments. Consequently, the ability to react on behalf of your portfolio is greatly limited by just how fast the news now travels, and, more specifically, by how quickly the markets move in response to it.

One of the reasons I am a big believer in gold and silver is because of the metals’ potential to act as a hedge against negative activity in the equities markets. Today, when news capable of triggering a vast sell-off in the markets actually hits, it will do so faster and with greater intensity than ever before. The speed of your own “reaction time” likely won’t matter, either, because if you have to react, the window of opportunity will have already closed. You need to be appropriately allocated before the trigger news hits, and allow your thoughtfully-constructed, effectively-diversified portfolio to work for you in these circumstances.

Had Ross’s report been accurate, the likelihood is that we would right now be in the midst of a significant, ongoing deterioration in the markets. News of that magnitude could not only trigger a shorter-term correction, but might act to precipitate the bear market that increasing numbers are now predicting.

There’s never a bad time to allocate some of your resources to alternative assets that have an extremely low correlation to the stock market. At Augusta Precious Metals, we are pleased to offer complimentary portfolio reviews to those individuals interested in adding gold and/or silver to their current mix of assets. If you’d like to learn more about how precious metals can potentially help to better insulate your portfolio from the effects of wild news stories, both true and false, give Augusta a call at 855-242-4121.

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Michael Dallo, CPA, JD, LL.M. is a tax attorney and certified public accountant (CPA) of Dallo Law Group, a Professional Corporation. For over 10 years, Michael has zealously represented hundreds of clients in resolving tax disputes with the Internal Revenue Service and California taxing agencies, as well as developing sound tax positions and arguments to minimize their federal and state tax liability.