Price of Gold Fundamental Daily Forecast – Tax Reform News Boosting Stocks, Pressuring Gold

Gold prices are being pressured early Monday by rising U.S. Treasury yields, a stronger U.S. Dollar and increased appetite for higher-yielding assets. The moves are being fueled by expectations that the U.S. economy will expand further after the Senate passed a bill to overhaul the country’s tax system over the week-end.

At 0737 GMT, February Comex Gold futures are trading $1275.60, down $6.6 or -0.51%.

In the wee hours of Saturday morning, the U.S. Senate narrowly approved the overhaul of the U.S. tax system, bringing the Republican Party and President Trump closer to their goal of slashing corporate taxes and the rich while offering middle class Americans a less-pronounced number of changes.

In other news, hedge funds and money managers raised their net-long positions in COMEX gold in the week to November 28, U.S. data showed on Friday.

Forecast

Gold is threatening key support early in the session. The trend turned down last week, but there wasn’t much of a follow-through to the downside. The first key level on the charts today is $1272.30, followed by previous bottoms at $1268.10 and $1267.00. Given the recent price action, I think buyers are going to have to take out $1312.70 before investors will trust this market on the upside.

And why would anyone trust a rally in gold right now with the U.S. set to raise rates later this month and perhaps as many as three times in 2018. Additionally, money continues to pore into U.S. equity markets, helped by the possibility that U.S. tax reform will become law later this week, or sometime before Christmas.

Even another ballistic test by the North Koreans couldn’t encourage investors to buy the precious metal in a major way last week. We did see some movement to the upside on Friday when Michael Flynn, a previous ally of President Trump pleaded guilty to lying to the FBI. This news drove stocks sharply lower, underpinning gold prices.

This tells me that the only way gold is going to make any meaningful rally over the near-term is if there is a major sell-off in the stock market. Otherwise, we’re expecting support to continue to erode.