The financial markets were largely quiet at Wednesday’s open as investors eagerly awaited the scheduled release of President Trump’s plans for a tax overhaul later today. Most expect the plans to be quite favorable to the public, a scenario which is not likely to drive fresh investment into the gold market. Spot gold was just below unchanged at 9:15 am EST in New York, trading around $1,265/oz, while spot silver was down about 0.4% to $17.50/oz.
The platinum price was 0.7% lower. Like gold, palladium was effectively flat.
We will find out later today whether all of the tax proposals that have been floated by the White House and others will make it into the president’s formal proposal to Congress as part of the must-pass budget and spending bill. The early reports are that in addition to reducing the top corporate tax rate from 35% to 15%, Trump wants to increase the standard deduction that most middle-income Americans can claim on their taxes. This change could affect tens of millions of families. There have also been leaks that the proposal would cut taxes on businesses small and large alike. Overall, Treasury Secretary Steve Mnuchin called it the biggest tax cut in U.S. history.
Undoubtedly, the action in the markets today will be focused on the substance of these proposed changes to the tax system, an issue generally supported by Republicans in Congress. Stocks were cautiously higher in the U.S. this morning, while European bourses saw mostly sideways action. The 10-year Treasury yield rose 3 basis points to 2.33% and the dollar was 0.4% higher on the DXY index.
Trump may secure Democratic support for the legislation by including large appropriations for infrastructure spending. Of course, there is still the looming potential of a government shutdown if the legislative process again becomes gridlocked, but the White House has recently walked back its rhetoric on a shutdown.
Other key presidential prerogatives have received mixed reviews. For instance, the trade dispute with Canada may prove to be a deeper issue than initial reactions would have suggested this week. It will likely take years to sort out. Even though some have characterized this as a problematic trade war, Trump has actually received praise from both Republicans and Democrats for standing up for the fair treatment of U.S. industries. It also raises questions about the future of NAFTA, one of Trump’s consistent campaign refrains.
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.