A1 Trading Company

Ticker tape by TradingView

June 7, 2021

Could Biden's Budget Spell Trouble for the Dollar and how could it Impact Gold?

Theo Ashley-Hacker

Last Weekend President Joe Biden released his first annual budget - a $6 trillion spending plan that includes new social programmes, investment in the fight against climate change and steep tax increases for wealthier Americans. Should it pass congress, national debt is predicted to reach 117% of GDP by 2031, surpassing levels seen during World War Two, despite at least $3tn in proposed tax increases on corporations, capital gains and the top income tax bracket.

What could this mean for the US Dollar?

Any substantial spending or printing of money is considered bearish for a currency in the long term as product prices rise and become less competitive internationally, the currency becoming less sought after. Tax increases will decrease the incentive for foreign investment in the US and may result in individuals and some corporations moving their operations oversees. However there could be some short term optimism for the dollar in the short run as investors bet on future interest rate rises to slow spending. Keep an eye on releases such as CPI and Fed Chair Powell's statements for hints of interest rate hikes.

How could this Impact Gold?

Gold is seen as a safe haven and is often referred to as a hedge against inflation, as unlike government regulated currencies, you can't print more gold so naturally over time, it gains value. This is why gold is likely to accelerate in its bullish run fuelled by dollar inflation. It's possible that debt continues to rise to the point where investors begin to loose confidence in the economy at which point they may sell assets such as bonds and move into gold. It is also important to remember that gold is most commonly traded in US Dollars so any depreciation of the USD will cause an appreciation of Gold against it.

A1 Edgefinder

#1 Market Scanner Tool
Take 10% off using code "READER"
GET ACCESS NOW
Want to See Our Trades?

Join The VIP Community!

Our entries, exits & analysis
Live Webinar Coaching
Trading Chatrooms
Strategy Library 
Exclusive Trading Guides
Use Code "READER" for 10% OFF!
JOIN NOWJoin FREE Discord
Listen to More Episodes
Even More Bullish USD News

This morning at 8:30 am Eastern Time, the United States’ Bureau of Economic Analysis released even more bullish USD news. The Core Personal Consumption Expenditures (PCE) Price Index, which measures changes in prices for consumers (excluding volatile food and energy prices), rose more than expected month-over-month. A 0.5% increase was expected for August, with 0.6% […]

Read More
Historic Peril for the Pound

A strange series of events recently sent the United Kingdom’s Pound Sterling tumbling to historic lows. Just weeks after the death of Queen Elizabeth II (a head of state who was uniquely well-liked among the UK’s population by contemporary standards) Kwasi Kwarteng, Britain’s new chancellor in recently appointed Prime Minister Liz Truss’ administration, issued a […]

Read More
Get Ready for the Bear Market

Last week’s selloff was brutal for investors in the US stock market: the Dow Jones Industrial Average closed at its lowest level since late 2020, falling to 29590.41, losing 1.6% on Friday alone. With the S&P 500 currently down a whopping 23% from January’s highs this year, and other indexes close behind percentagewise, stock market […]

Read More
DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here
Home
Edgefinder
VIP
Menu
homesmartphonelaptopmenu linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram