Gold Silver Market Report 28 April 2017

Fundamentals and News^*

Bond Vigilantes Lie In Wait as Trump Tax Plan Seen Swelling Debt

The Trump administration’s tax plan — and its disregard for the effect it would have on the federal budget deficit — is certain to pique the interest of a long-dormant segment of bond investors.

So-called bond vigilantes, once feared for enforcing restraint on spendthrift governments, have struggled to flex their muscles in recent years as global central banks stepped in to buy a glut of sovereign debt. Now may be the time for a comeback, with the Federal Reserve talking about trimming its Treasury holdings while the administration’s tax plan could spur more borrowing to cover a shortfall (assuming the projected economic growth doesn’t materialize).

The notion of the bond market holding elected officials to task is of course met with skepticism, given Barack Obama more than doubled the U.S. marketable debt over his two terms as president, to almost $14 trillion. And that burden is poised to nearly double again over the next decade, according to estimates by the Congressional Budget Office that don’t factor in Donald Trump’s fiscal initiatives. His budget director said in a Bloomberg Television interview last week that “deficits are not driving the discussion.”

“While the White House appears likely to rely on optimistic growth assumptions to offset most of the fiscal effects of the proposed tax cut, Congress will not be able to do so,” Goldman Sachs Group Inc. strategists led by Jan Hatzius wrote in a note Thursday. “Indications of openness to a tax cut among congressional Republicans suggest that a tax cut is more likely than revenueneutral reform. We expect a long road ahead.”

Here are four indicators to monitor as the tax legislation progresses to gauge whether the bond vigilantes are back at it.

“Bond vigilantes are now clearly showing no signs of vigilantism,” said Edward Yardeni, president of Yardeni Research Inc. in New York, who’s been following the bond market since the 1970s. He coined the term “bond vigilantes” in the 1980s to describe investors who sell bonds to protest monetary or fiscal policies they consider inflationary.
(*source Bloomberg)
 

Data – Forthcoming Release

Technical Outlook and Commentary: Gold

Gold for Spot delivery was closed at $1264.30 an ounce; with loss of $4.92 or 0.39 percent at 1.00 a.m. Dubai time, from its previous close of $1269.22

Spot Gold technically seems having resistance levels at 1281.7 and 1288.40 respectively, while the supports are seen at $1260.1 and 1253.4 respectively.

Technical Outlook and Commentary: Silver

Silver for Spot delivery was closed at $17.26 an ounce; with loss of 0.23 cent or -1.33 percent at 1.00 a.m. Dubai time, from its previous close of $17.49

The Fibonacci levels on chart are showing resistance at $17.82 and $18.01 while the supports are seen at $17.21 and $ 17.02 respectively.

 

Resistance and Support Levels

Indications only, open & closing prices are bids; data source: Bloomberg; important disclaimer below; Times as per Dubai

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