Price of Gold Fundamental Daily Forecast – Traders Shifting Focus to Tax Reform, ADP Jobs Report and GDP

Gold prices jumped to their highest level since November 9 on Tuesday as investors bought bullion to offset risks perceived in higher-yielding assets. Early in the session gold was driven by a drop in the U.S. Dollar and a steep decline in U.S. stock markets.

December Comex Gold futures settled at $1318.90, up $3.60 or +0.27%.

The weakness in the Greenback made dollar-denominated gold a more attractive asset to foreign buyers. Additionally, investors selling their positions in stocks parked their proceeds into gold. Investors also used gold as a hedge against further declines in equities.

By the end of the session. Gold had retreated well off its high as the dollar and stock markets recovered, prompting bullion investors to book profits and reduce speculative positions.

Forecast

Gold prices are under pressure early Wednesday as investors react to firmer equity prices and rising Treasury yields. Gold will continue to retreat if stocks continue to rally and government bonds and notes continue to weaken. It’s all part of the unwinding of the risk trades placed in response to North Korea’s launching of a missile over Japan.

The focus for gold traders is expected to return to more traditional fundamentals on Wednesday.

President Trump is expected to announce his tax reform plan. His next step will be to gather support for the plan which his administration developed with Republicans. Given his past history with previous pieces of legislation, he is going to have to convince the Democrats to go along with the plan. If not, the process of tax reform could drag on for weeks.

Traders will also get to respond to the latest report from ADP. Its Non-Farm Employment Change report is expected to show the private sector added 185K jobs in August.

The major report is quarterly Preliminary GDP. It is forecast to show the economy grew by 2.7%, up slightly from the previous 2.6%.

FOMC Member Jerome Powell is also scheduled to speak. Recently, he said below-target inflation is “kind of a mystery” since the labor market is tightening. He also said that weak inflation gives the Fed the “ability to be patient” regarding future rate hikes.

Fed Governor Powell also expects some kind of action on taxes next year, but isn’t really factoring it into his economic forecasts yet.

Last week, Powell also warned the nation’s elected leaders that a failure to raise the government’s borrowing limit could bring real pain to the economy.

The tax reform discussion, a strong ADP number and a better-than-expected GDP report could be supportive for the U.S. Dollar. This would put pressure on gold prices. However, gains could be limited if Powell is dovish on interest rates.