Price of Gold – Fundamental Forecast, April 28, 2017

Gold prices inched higher on Thursday, but not for the usual geopolitical reasons. Traders said the price action was largely influenced by the new tax plan revealed by the Trump Administration on Wednesday.

June Comex Gold futures finished the session at $1265.90, up $1.70 or +0.13%.

On Wednesday, President Trump finally released his tax reform plan that he had called the biggest in history. The plan called for deep cuts in business tax rates and major changes to the individual tax system.

If enacted into law, the deep tax cuts would, in theory, boost economic growth, thereby boosting the U.S. Dollar. A higher dollar would make dollar-denominated gold a less-desirable asset for investors.

Trump’s plan was viewed as disappointing because it lacked important details. Because of this, it could face resistance from lawmakers. This could put pressure on the U.S. Dollar, which would then support gold prices.

Forecast

A combination of technical factors and light fundamentals are helping to keep gold afloat for the time being.

The key support area is $1262.90 to $1260.70. Since the main trend is up, buyers are coming in on weakness to defend the trend. If the buying increases then we could see the start of a labored rally.

If $1260.70 fails as support then we could see an acceleration to the downside with $1247.70 the primary downside target.

Fundamentally, bullish conditions began to change from the opening on Monday after the exit polls in France showed the market’s favored candidate progressed through to the second round of the French presidential election. This helped spark the unwinding of safe-haven trades while increasing demand for higher yielding-assets. In other words, gold went down while stocks went up.

Furthermore, the apparent easing of tensions over North Korea also weighed on prices although this issue still remains a hot topic.

Friday could be an active day in the gold market because of a slew of U.S. economic data, Fed speakers and the decision to keep the government afloat.

U.S. economic data includes Advance GDP, Chicago PMI, and Consumer Sentiment. FOMC Members Brainard and Harker are also scheduled to speak.

The economic data and Fed speakers could move the U.S. Dollar on Friday. If the news is bullish, the dollar will rise and gold prices could plunge.

If the U.S. fails to reach a settlement on a government shutdown, gold could take flight especially if investors decide to shed risky assets.