The new president took a few executive actions this week. What do they mean for the gold market?
So it began. On Monday, Trump signed three presidential directives. First, he withdrew U.S. from the Trans-Pacific Partnership. Second, he imposed a hiring freeze on all federal workers, except military. Third, he prohibited federal funding for foreign nongovernmental organizations that promote or pay for abortions.
On Tuesday, President took three more executive actions. First, he approved the Keystone pipeline. Second, he approved the Dakota Access pipeline. Third, he signed an order to speed up the environmental review of infrastructure projects. And as a reminder, on Friday night, Trump signed an executive order aimed at minimizing the economic burden of the Obamacare and allowing the federal government to start dismantling it.
With the exception of the Trans-Pacific Partnership, all moves look reasonable and mark a nice start, at least for the business circles. Although Trump did not fulfill most of his earlier promises, he is not wasting time, giving an impression of enacting policies based upon past pledges. He promised a withdrawal from the TPP – and it’s gone. He declared himself as a pro-life, anti-environmentalist and anti-Obamacare – so we got adequate orders. This is probably why the risk trade returned to the markets yesterday and the U.S. dollar pulled away from multi-week lows, while the price of gold declined.
The bottom line is that Trump took several executive actions over the last few days. We got a mixed bag of protectionism, fiscal austerity, structural reforms and support for energy infrastructure projects. It seems that markets do not like the protectionist stance – this is why gold shined after Trump’s harsh inaugural speech – but welcome signals of easing regulation and fiscal stimulus. Therefore, the impact of the new president on the gold market will depend on which side of Trump’s nature will prevail – the protectionist or pro-growth. 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.
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