Will the Interest Rate and Trump Tank Gold?
Gold prices have fallen in the lead-up to and following U.S. President Donald Trump’s joint congressional address on Tuesday.
Gold prices currently sit at $1,244, down roughly one percent following President Trump’s address to Congress.
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As the economy continues to surge since Trump’s November 8, 2016 election victory, some investors are choosing to forgo gold and instead try their luck on the booming markets.
Gold is often seen as a hedge against volatility in the U.S. economy. But with the Dow Jones and S&P 500 hitting all-time highs in recent months, gold has lost some of its shine.
With Trump’s business-friendly tax proposals and policies, the U.S. economy has benefited off of the presumed boost. Much of his policy has remained vague, however, and will need congressional approval.
Trump earlier had delayed his tax plan, citing difficulties implementing his healthcare policy. Details of the tax overhaul were pegged to be released in the near future, with no solid data given. The healthcare plan release is currently slated for some time in March. (Source: “Trump’s tax plan release takes back seat to health care,” MarketWatch, February 16, 2017.)
Another factor that could affect gold prices moving forward is the U.S. interest rate.
U.S. Federal Reserve chair Janet Yellen will be giving a talk this Friday that will likely signal whether an interest rate raise is nearing. If the Fed decides to hold off on raising interest rates, the U.S. dollar’s value will be negatively impacted, which would benefit gold prices. (Source: “Gold price slips ahead of Trump policy speech,” CNBC, February 28, 2017.)
Market odds, however, have increased to as high as 80% that the interest rate will experience an uptick in March. (Source: “Market odds of March rise in US interest rates hit 80%,” Financial Times, February 28, 2017.)
Silver prices have very much mirrored gold since the election, hitting $18.39 following the president’s speech, down a fifth of a percent from the day before.
