Price of Gold Fundamental Daily Forecast – Bulls Need Help from Weaker Stocks, Dollar, Interest Rates
Gold futures rose on Thursday as the weaker U.S. Dollar made the dollar-denominated asset a more attractive asset to foreign buyers. The precious metal was also supported by a sharp break in U.S. equity markets. Investors sold higher yield assets and moved the proceeds into the safe haven gold market.
December Comex Gold settled at $1287.50, up $3.80 or +0.30%.
News that there were issues with the Republican tax reform plan drove down U.S. Treasury yields. This made the dollar a less attractive asset, driving up gold prices.
According to CNBC, the Senate Republican’s bill to rewrite the tax code differed from their House counterparts’ plan. Like the House version, the Senate’s proposal would cut the corporate tax rate to 20 percent from 35 percent, but the Senate plan would delay implementation until 2019.
The politicians suggest this process is normal, however, the market action suggests investors want clarity.
Additionally, both plans call for a tax on $2.6 trillion in foreign profits held offshore by U.S. multinationals. The Senate wants that tax to be 12 percent for cash and liquid assets, and 5 percent for non-liquid assets. The House amended its bill on Thursday, going to 14 percent and 7 percent respectively.
Furthermore, both bills would add $1.5 trillion over 10 years to the U.S. budget deficit and national debt, which in the past would likely have faced criticism from Republicans.
In other news, Weekly initial claims for state unemployment benefits increased 10,000 to a seasonal adjusted 239,000 for the week-ended November 4, the Labor Department said Thursday. Traders were looking for a rise in claims to 231,000.
The Commerce Department said wholesale inventories rose 0.3 percent. This matched a survey of economists. Additionally, the strong growth in August was revised slightly downward from 0.9 percent to 0.8 percent.
Gold futures are trading lower early Friday. The inability to follow-through to the upside after Thursday’s gain and a slightly better U.S. Dollar is putting pressure on the precious metal. However, gold remains in a position to post its first weekly gain in a month.
Gold will rally on Friday if a drop in U.S. Treasury yields leads to a weaker U.S. Dollar. Additionally, another sell-off in the equity markets will likely send investors into the safe haven gold market.
The U.S. will be on bank holiday so there will be no government reports. However, investors will get the opportunity to react to the Preliminary University of Michigan Consumer Sentiment report. It is expected to come in at 100.8.
The chart pattern suggests a sustained move over $1286.80 will indicate the presence of buyers and taking out $1292.90 will change the daily trend to up. This could trigger an acceleration to the upside.