Gold Price Forecast: Will Proposed Tax Cuts Give a Boost to the Economy?

In the world of politics—and often economics—perception often becomes reality. We’ve seen that throughout 2017 as changing geopolitical headlines seemed to affect markets one way or the other. And now that politicians in Washington are moving forward on a new tax plan that should affect most Americans, it’s important to pay attention to the market’s reaction—even before any action is taken on the actual tax cuts. The markets, as most gold investors will realize, have a strong effect on the perception and price of gold. If we’re going to make an accurate forecast, we need to stay up to date.

Gold Uncertain, But Room for Expansion

Gold’s performance as of this morning is once again uninspiring, only down about a dollar or so to remain under $1,300 per troy ounce. As MarketWatch notes, there is plenty of room for gold to move up if there are uncertain geopolitical headlines once more, but other elements in the economy (such as the strength of the U.S. dollar) have cut short gold’s adventures above the $1,300 barrier.

According to MarketWatch: “While a stronger dollar has pressured gold, holdings of large gold exchange-traded funds have increased, said Naeem Aslam, chief market analyst at ThinkMarkets UK, in a note.”

That means there might be money continuing to move to gold even as some wonder whether stocks are the safe bet. There is a good chance that the proposed tax cuts could be bullish for those who believe in supply-side economics.

Will the Proposed Tax Cuts Affect Gold?

Now that we know where gold is and where its recent performance may suggest analysts place its current value, let’s get to a question focusing on the forecast: will gold have plenty of room if there are tax cuts? The traditional viewpoint amongst business types is that tax cuts could be good for the economy, leaving more money in the hands of investors who can then put money in their 401(k) plans. This puts more money into equities, keeping the stock market train rolling.

Is that really how it will work?

We’ve seen a poor month for gold independent of these issues. Expectations already had the tax cuts coming late this year. It’s possible that formula is already “baked in” to the current asset prices—and the relative lack of movement in the stock market late this week is testament to the lack of motivation on the part of investors.

Looking at Gold for the Latter Half of 2017

With gold coming off of a weak month, it’s tempting to see this as a dip in which investors can get in. But that doesn’t mean this is the end of that dip. What we’ll have to see is where headlines go, since today’s geopolitical headlines have had so much to say about where both the markets and precious metals should be headed. Gold bugs are always looking to buy in situations like today—when gold optimism is relatively low—but that doesn’t mean there isn’t room for a dip in October, either.