On Wednesday, the White House unveiled Trump’s tax reform plan. What does it mean for the gold market?

Finally, the new administration has presented the long-awaited tax plan. The key elements are as follows:

The whole plan is only about 100 words long and it is very similar to the Trump’s tax proposal from the campaign. The plan is said to provide a “massive tax cut”, or even the “biggest tax cut” in the U.S. history. So it should be good for the stock market and bad for gold, right? Well, it should, but there is one problem with that plan: it lacks any details. In particular, nobody knows how the tax cuts would be financed. As a reminder, an almost identical plan from the campaign would reduce federal revenues by $6.2 trillion, according to the Tax Policy Center. Hence, the proposal would boost the U.S. federal debt by $7.2 trillion (the sum includes interest costs) over the decade. It goes without saying that such a reform would be unacceptable for fiscally conservative Republicans. And because the plan is tilted toward the rich, Democrats would not accept it either.

This is why the plan disappointed the markets and raised justified skepticism, which sent the stock market lower and made gold rebound from two-week lows, as one can see in the charts below.

Chart 1: The S&P 500 Index over the last three days.

Chart 2: The price of gold over the last three days.

Summing up, Trump has finally presented his long-awaited tax plan. The proposal lacks any details and there are serious doubts how it might actually get passed in Congress. It signifies the final blow to the Trump rally, which is good news for the gold market.