Spot pricing for Gold $AU3732

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As we’ve endured higher rates for longer, higher cost of living pressure, inflationary pressure and higher levels of debt; our collective Economy continues to look stronger than ever.

So what is the next trick up the FED’s sleeve to slow inflationary pressure even more?

If you’d forgotten about it – TAX is now up for discussion (collective groan). Specifically corporate tax.

We all know that the inflationary cycle we are in, is resultant from the excessive Covid-19 stimulus that was pumped into our economy. This was never free money, and would need to be paid back at some point. Inflation ironically helps reduce this debt (By today’s standard, the stimulus required for a new Covid-19 situation would be vastly higher, because of inflation). But this debt still needs to be repaid. Welcome to the next stage – higher taxes.

This week US Vice President Kamala Harris has proposed to increase the corporate tax rate from 21% to 28%. The current tax rate of 21% is due to expire in 2025 and was implemented during Donald Trump’s Presidency. Trump reduced the corporate tax rate of 35% to 21% in an effort to drive more US companies to keep their profits in the country instead of simply declaring profit in a lower tax driven country.

Kamala Harris’s plan to increase corporate tax would reduce the country’s deficit by $1T over the next decade.

And while on the surface this would all seem like a great idea, however it begs the question of whether US multi-national companies would again simply move profits offshore. Flipside, if Trump is re-elected, he will surely keep tax rates lower to keep companies happier to continue trading in the US.

As is the political beast that is America, whichever policy (tax or otherwise) resonates with the most people could well be the decider. Kamala Harris seems to connect well with a struggling middle class while Trump resonates with conservatives and businesses in general.

Enjoy today’s charts.

Gold daily chart, with 200MDA