Gold looks good as Biden pushes trillions in new infrastructure, education spending in Address to Congress - Analyst
(Kitco News) - The gold market is holding on to solid gains after President Joe Biden laid out his economic plan for American, which would include trillions of dollars in spending.
Biden started his address to Congress promoting his American Infrastructure Plan, which proposes $2 trillion to upgrade grade the nation's crumbling infrastructure. Bidden highlighted that the plan would provide high-speed internet access for rural Americans and improving the power grid and developing green energy to combat climate change.
June gold futures last traded at $1,786.50 an ounce, up 0.65% on the day.
Along with his infrastructure plan, Biden also introduced another $1.8 trillion American Family Plan that would give inexpensive childcare to lower-income and middle-class families. His plan would also include two years of free education at community colleges.
Biden also proposed as 12-week of paternal leave for families.
"Nobody should have to choose between their family and a paycheck," he said.
Biden said that he would also like to see the minimum wage increased to $15 an hour. "Nobody working 40-hours a week should be living below the poverty line," he said.
Adam Button, chief currency strategist at Forexlive.com, said that Biden's address couldn't have provided a better script for the gold market.
He added that Biden's message of increasing spending on education and infrastructure to compete with China is a message that will resonate with voters.
"It's also what you want to hear if you are a gold investor," he added.
Not only is the Biden administration proposing trillions of dollars in new spending, but Button noted that the address came on the same day that the Federal Reserve reiterated its stance that it is in no hurry to raise interest rates.
"You can't have a better environment for gold. The government wants to spend more money and the central bank is going to keep interest rates low," he said. "It is surprising that we don't see a bigger move in gold prices."
Adam Button said that from the speech, it is clear that Biden wants to build an economic legacy. However, that will be expensive, he added.
But it's not just government spending that is bullish for gold prices. Biden said that he would like to see reform on corporate taxes so companies "pay their fair share."
He added that he would like to see the tax rate for the wealthiest Americans rise to 39.6%. "That was the tax rate when George W Bush was president," he said. "I believe what I propose is fair and fiscally responsible."
Market analysts have noted that higher corporate tax rates and will be negative for the U.S. dollar and, in turn, be positive for gold.
"With everything that is going on, you just can't help but be bullish on gold," said Button.