Gold is consolidating within yesterday’s range amid conflicting fundamentals. Silver on the other hand remains defensive, slipping to a 6-week low and driving the gold/silver ratio to a 5-month high near 73.
Heightened risk appetite in the wake of the French election and the roll-out of the Trump administration’s tax plan is being tempered somewhat by geopolitical tensions, as well as concerns surrounding the specifics of the tax proposal.
Senators received “a long and detailed briefing” on the North Korean situation yesterday. “The military is obviously planning for a number of options, as they should — minimal military action to more significant action,” said Senator Ted Cruz of Texas. North Korea was confirmed as the Trump administration’s top foreign-policy priority.
Critics of the President’s tax plan complain that it is woefully short on specifics. “It’s the beginning of a negotiation but the numbers don’t add up, it’s never going to get through Congress in its current form, it’s completely devoid of detail,’ said Jim Rickerts in a SkyNews interview. Maya MacGuineas, president of the Committee for a Responsible Federal Budget, told the New York Times, “[T]here is no golden goose at the top of the tax-cut beanstalk, just mountains of debt.”
Ms. MacGuineas’s group estimates that Mr. Trump’s plan could reduce federal tax revenue by $3 trillion to $7 trillion over a decade. — NYT
The President’s team contends that the tax cuts will stimulate stronger growth, and hence generate more not less tax revenue. But this isn’t the 1980s, and that idea faces a pretty strong headwind from the demographic realities.
The Atlanta Fed slashed their estimate for Q1 GDP yet again, to a scant 0.2%. Goldmann Sachs is now expecting 1.1% growth in Q1, down from its previous estimate of +1.4%.
We’ll see the Q1 Advance Report from the BEA tomorrow morning. If the GDPNow model is closer to the reality than the current median expectations of +1.3%, the March (and December) rate hike(s) are going to look pretty foolish.