Gold prices rose to a three-week high for the second day in a row on Thursday last week. 1 The yellow metal’s spot price increased to $1,287.74 per ounce by 2 pm in New York, after having hit a previous high of $1,286.19 on Wednesday, reported the gold price history chart. The surge in gold and, by extension, the rest of the precious metals complex, was driven by a dollar crash on reporting of disquieting issues with the GOP tax plan before Congress.

Why Is the Dollar Weakening?

There are two main concerns with the GOP tax plan that are causing the value of the dollar to decline: the content and the process.

Content Issues

First, concerns as to the content are led by the fact that both the House and Senate versions of the bill, in the words of Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget, ‘blows a massive hole in the debt.’ Both versions include unfunded spending of $1.4 trillion over the first ten years, which would add directly to the national debt. Furthermore, the Senate version delays corporate tax cuts by a year. The latest Senate version seeks to repeal the individual mandate of the Affordable Care Act, which would save the government $318 billion over the next 10 years but likely garner opposition from some Republicans. 2 Losing Republican votes for the plan could require support from Democrats—an unlikely scenario especially due to the health care change. 3

Squabbles over the top income tax rate are also dividing some GOP members. When added to last week’s explosion over the 20 percent excise tax on foreign earnings, the market is finding it harder and harder to get excited about this tax plan. 4

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Process Problems

Next, the process appears to be complicated and badly managed. On Thursday, both the House and Senate revealed separate versions of the bill: House members promised a vote on theirs this week and the Senate Finance Committee pledged to mark up its version on Monday, which it did to include a repeal of the individual mandate.

The lack of focus and continuity between the two branches would on its own be enough to cause concerns, but additionally, Senate rules require that if the final bill does not remove any further red ink past ten years from its proposal, the bill will be subject to a 60-vote threshold, which would require cooperation from the Democrats. The addition of the controversial individual mandate repeal solves this problem but create others, as mentioned above. 5

In short, pretty much everything about the GOP tax plan as it stands is creating fear among dollar bulls.

What Does This Mean for Precious Metals Prices?

As anticipated, fear of a failed Congressional legislative session and therefore of the Trump economic agenda are driving a dollar crash, equity weakness, and a flight to the safety of precious metals. Expect the markets to live dangerously the next couple of months, as GOP members scramble to find a way to ensure that at least some of the promises made by both the President and the party will be kept. The more it looks as though they’re not going to get there, or that the final result will be flawed, the worse the market will react. Barely a day goes by now without warning from another prominent voice that we’re in a stock market bubble and a crash is imminent.