Gold Price per Ounce Rises on the Back of Political Uncertainty
Gold prices continue to climb as recent news of the failed U.S. healthcare bill exemplifies potential difficulties ahead for the presidential administration to enact legislation.
While U.S. President Donald Trump has been sold as a boon to businesses, stocks, and the economy, Trump’s administration has begun to show cracks after its first major healthcare bill failed to even reach a vote. This has, in turn, strengthened the renewed interest in risk management commodities, sending gold prices to $1,254 per ounce. (Source: “Gold Prices Rise as AHCA Failure Cools Fed Rate Hike Outlook,” DailyFX, March 27, 2017.)
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U.S. Treasury bond yields and the dollar fell after President Trump’s American Health Care Act of 2017 (AHCA) failed to be introduced last Friday. Trump’s other promises on the campaign trail are now being called into question, as the Republican Party controls both houses of Congress and the White House, yet was unable to secure a victory for the president’s bill.
This level of political uncertainty is new to the market since Trump gained power months ago. Both the Dow Jones and the S&P 500 had experienced strong gains in the early goings of 2017, as analysts expected business-friendly policies to emerge soon from the administration. As such, demand for hedge assets dropped, and gold prices fell as a result.
Trump’s mandate to repeal and replace Barack Obama’s Affordable Care Act had been touted by many Republican supporters and the Trump administration alike. Republican members of Congress, especially, had been targeting the healthcare law for years, attempting to repeal the bill, but being unable to do so due to former President Obama’s veto powers.
With total control on the federal level, the Republicans’ inability to pass Trump’s current proposed healthcare legislation is creating doubts as to the efficacy of the current stock market rally. This sense of doubt has again increased the demand for hedge assets like gold.
