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Healthcare Bill, IMF and Gold

On Tuesday, Republicans were forced to delay the Senateâ??s vote on the replacement for Obamacare. The vote was postponed to after the Fourth of July recess, as it turned out that it lacked supp...

This week, the U.S. Senate delayed the vote on the healthcare bill. What does it mean for the gold market?

On Tuesday, Republicans were forced to delay the Senate’s vote on the replacement for Obamacare. The vote was postponed to after the Fourth of July recess, as it turned out that it lacked support. The Congressional Budget Office’s estimation that the bill would leave about 22 million more people without health insurance by 2026 did not help the bill’s prospects.

The struggle in the Senate made investors worried about Trump’s ability to deliver his pro-growth agenda, which is good news for the gold market. As a reminder, cuts to the health sector are highly needed to finance tax reform. And the Trump administration and Congress face mounting pressure from U.S. businesses and voters to deliver tax reform. This is why not earlier than last week, House of Representatives Speaker Paul Ryan said that he hoped to complete tax reform until the end of 2017, with a new tax system in place by the beginning of 2018.

The lack of reform may affect the U.S. economy and market sentiment. This week, the International Monetary Fund cut its growth forecasts for the U.S. economy from 2.3 in 2017 and 2.5 in 2018, to 2.1 percent in both years, as it dropped its assumption that President Donald Trump’s tax cut and fiscal spending plans would boost growth. If the economic outlook deteriorates further, gold may shine. However, Trump and Congress may finally deliver on their promises. As a reminder, the House of Representatives last month passed its own version of a healthcare bill, despite initial lack of support.

The key takeaway is that the U.S. Senate postponed a vote on the healthcare bill. The decreasing faith in Trump’s ability to fulfill his promises hurts the greenback which should be theoretically positive for the yellow metal. However, this week’s weakness in the U.S. dollar did not provide more support to the gold markets, which is disappointing for the gold bulls. It turns out that gold needs a stronger catalyst to trigger a rally. Stay tuned!

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Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.

Thank you.

Arkadiusz Sieron
Sunshine Profits‘ Gold News Monitor and Market Overview Editor

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