Gold Drops On Trump’s Tax Promise

February 9th, 2017 by

percent-interest-taxesDonald Trump did this morning what rising stocks and lower jobless numbers could not. Bargain hunters in the gold market were buying on any dips caused by traders booking recent profits, keeping prices near yesterday’s three-month high.

Market fortunes reversed instantly, however, after President Trump made a surprise announcement that he would be unveiling a “phenomenal” plan for tax cuts in the next week or two. This sent spot gold down more than $8 an ounce in a matter of minutes as the dollar and stocks surged.

Precious metals were coming off gains across the board this morning, after gold sealed a fifth straight day of its rally. The dollar, which was struggling under pressure from the British pound and euro, was having problems staying out of the red.

The first-time jobless report this morning showed that 12,000 fewer people filed for unemployment last week compared to the previous week. The 234,000 number was far lower than the slight increase to 249,000 economists were expecting, giving stocks a lift. Gold however, shrugged at the news, holding near session highs.

This all changed in a flash, when Trump announced out of nowhere that his team would be revealing the administration’s long-awaited tax cut plan. Markets had become unnerved over Trump’s focus on protectionist trade policies and his halt to arrivals of people from seven predominately Muslim nations that are experiencing unrest.

The unexpected announcement sent stocks to new intra-day highs, and launched the DXY dollar index up over 100.50. Treasury prices fell, sending yields sharply upward to break a three-day rally that saw yields drop to a three-week low. Gold and silver prices dropped on the announcement, but platinum and palladium held on to gains.

Oil prices joined the party, with prices this morning up more than 1% on a big draw-down in natural gas stockpiles and growing gasoline demand in the US. The surprise announcement yesterday that gasoline stockpiles dropped by 900,000 barrels totally negated the bad headlines of the second-largest weekly jump in crude stockpiles on record. The 17 cent gain by WTI futures broke a three-day losing streak.

Financial stocks weighed on the Dow Wednesday, pulling it to a loss for the day. Those same stocks are now lifting the index, spurred on by this morning’s jump in Treasuries yields caused by the imminent disclosure of Trump’s tax cut plan.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product