Yesterday, the new president delivered a speech to Congress. What does it imply for the gold market?
Similarly to his acceptance speech, Trump struck a conciliatory tone. The address was inspiring and sometimes even poetic with notes of optimism:
“From now on, America will be empowered by our aspirations, not burdened by our fears – inspired by the future, not bound by the failures of the past – and guided by our vision, not blinded by our doubts.”
The unifying speech is bad news for gold bulls as the yellow metal used to serve as a hedge against Trump’s aggressive stance. When the new president acts more like a statesman, political uncertainty decreases. As a reminder, the price of gold plunged in November after Trump’s conciliatory victory speech. Hence, we could see a similar scenario now, especially given yesterday’s hawkish comments from the Fed officials.
Let’s leave aside Trump’s less explosive style for a while and focus on the substance. Or, actually, on the lack of any substance. Trump largely repeated his campaign promises – does he know that the campaign is over? President reiterated his plans to build a wall, to repeal and replace Obamacare, to rebuild infrastructure, to reform immigration policy and to introduce tax reform. However, Trump failed to provide any details. He just said:
“My economic team is developing historic tax reform that will reduce the tax rate on our companies so they can compete and thrive anywhere and with anyone. At the same time, we will provide massive tax relief for the middle class.”
Therefore, investors may be a bit disappointed. If the optimism about Trump’s economic agenda wanes further, gold could continue its upward trend. To sum up, Trump’s first address to Congress is behind us. He did not provide any details on his economic policies, but stroke an amiable and inspiring tone. We are yet to see whether the president’s empty but inspiring slogans will be enough to keep the Trump rally intact and to decrease the political uncertainty. For us, although there were no details on economic policy, Trump did seem positive compared with a turbulent month in office, which may be negative for the yellow metal.