Price of Gold Fundamental Daily Forecast – Optimism Over Tax Reform Drives Gold to Four Month Low

Gold price edged higher from near a two-month low on Wednesday, underpinned by a potential government shutdown, but limited by an advancing dollar on optimism over progress by Congress on tax reform. A modest recovery in U.S. equity markets also limited any advances.

February Comex Gold futures settled at $1266.10, up $1.20 or +0.09%.

Gold finished higher despite the stronger dollar. The dollar is being underpinned on expectations that Congress is going to pass tax legislation sometime this year. Republicans are actually hoping to approve a final bill and deliver it to President Donald Trump’s desk before Christmas.

Congressional Democratic leaders are also holding discussions with Trump and Republicans to avert a government shutdown on Saturday. The Democrats are pressing for demands on funding priorities and protecting young immigrants.

In other news, U.S. private-sector employment growth eased in November even as the manufacturing sector added the most jobs in at least 15 years. According to the ADP National Employment Report, private employers added 190,000 jobs last month, down from an unrevised 235,000 in October. Traders were looking for a gain of 189,000 jobs.

Revised Nonfarm Productivity grew 3.0%, matching the previous read, but coming in under the 3.3% estimate. Revised Unit Labor Costs fell 0.2% versus a 0.2% forecast.

IBD/TIPP Economic Optimism was 51.9, down from the previous 53.6 and lower than the 54.6 estimate.

The economic data was good enough to support the Fed rate hike in December. Rising rates are a negative for gold.

Forecast

On Thursday, gold investors are likely to deal with much of the same. They will continue to monitor the progress on tax reform and the averting the government shutdown. If there are any issues raised then we could see a short-covering rally. A resumption of the selling in the equity markets will also be supportive.

On the data front, traders will get the opportunity to react to the latest Challenger Job Cuts report. Weekly unemployment claims are expected to come in at 239K. Consumer credit is forecast at 17.4B, down from 20.8B.

The daily chart indicates that gold is in a well-established downtrend. If the downside momentum continues, we could see a move into $1253.50. This is a possible trigger point for a further break into $1242.00.