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The gold market is slightly lower in early trade on Wednesday as investors digest last night’s State of the Union address by President Trump. Stocks are also moving lower today while the dollar index is stronger.

The State of the Union

President Trump delivered his second State of the Union address last night. Although much of the President’s speech was in line with expectations, there were several key takeaways:

1. Trump began his speech on a bipartisan note. According to CNN, he was quoted as stating “There is a new opportunity in American politics, if only we have the courage to seize it. Victory is not winning for our party. Victory is winning for our country.” Trump then, however, struck a different tone when he discussed the politics of “revenge, resistance and retribution.”
2. The President also went on to discuss partisan investigations. According to CNBC, he was quoted as stating “If there is going to be peace and legislation, there cannot be war and investigation. It just doesn’t work that way.” Some took these comments to suggest that you can’t have a prosperous economy while investigating the President. The President’s address had drawn comparisons to Nixon’s 1974 State of the Union Address.
3. Women took center stage last evening. A record number of women were recently elected to Congress and there are more women in the workforce than ever before. This is something the entire country can and should be proud of and was one of the few moments of the evening in which republicans and democrats cheered together. It was beautiful moment for both parties and the country.
4. Trump laid the groundwork for declaring a national emergency to build the wall. Although he did not come out and say he would do so, Trump spent time building the case for this course of action. Trump described the southern border as very dangerous. He went on to comment on how others have voted for a wall in the past, and he will be the one to get it done.
5. There were numerous partisan reactions to Trump’s speech. From House Speak Nancy Pelosi giving a “golf clap” to various eye-rolls and facial grimaces, the democrats clearly are not in agreement on many of the statements and corresponding issues. Democrats will likely suggest that Trump’s speech was not entirely filled with truths, while the republicans will likely suggest that this is simply another instance in which the democrats are unwilling to work with the President.

Significant Challenges Ahead

Regardless of what side of the aisle you may lean to, the U.S. has numerous key challenges to address. The President and Congress must find a way to work together in order to achieve real change and to improve the lives of all Americans. The U.S. economy is achieving real, sustainable growth while job and wage growth are on the rise. The government must now find a way to keep it going.

The current administration and Congress will have numerous other issues to work on including foreign policy, immigration, infrastructure and general bipartisanship.

The state of the economy could have a major impact on financial markets. The ongoing trade war with China, the potential for rising interest rates, further tax cuts and government spending could all dictate market action in the next two years of Trump’s first term.

Market Reaction

Spot gold is down $2.30/oz at $1,311.90. Trump did not make any specific mention of ongoing trade talks with China in his speech, and markets thus far are showing a muted reaction. The key issues discussed, however, could potentially act as major market-drivers in the months and years ahead.

The market may simply be taking a healthy pause, allowing for some back-and-fill trade and digestion of recent gains. A slightly stronger dollar index may also be fueling a bit of selling today.

The overall fundamental and technical outlook for gold remains constructive. A dovish Fed, geopolitical risks and the potential for further dollar weakness may all keep the market well-supported. Any significant dips will likely be bought until proven otherwise, and the bulls could potentially look to stretch the recent rally further in the sessions ahead.