Yahoo Finance Price of Gold Fundamental Daily Forecast – Next Major Move Hinges on U.S. Tax Reform
Gold prices continued to retreat on Wednesday in reaction to a firmer U.S. Dollar. The Greenback was underpinned by rising U.S. Treasury yields. The catalyst behind the rise in yields was speculation that the next U.S. Federal Reserve chief may be a monetary policy hawk. Gold sellers are also responding to rising optimism over U.S. tax reform.
December Comex Gold futures settled at $1283.00, down $3.20 or -0.25%.
U.S. Treasury yields rose on Wednesday, making the U.S. Dollar a more attractive investment and driving down foreign demand for dollar-denominated gold.
The yield on the benchmark 10-year Treasury note closed around 2.341 percent, while the yield on the 30-year Treasury bond settled near 2.851 percent.
The big story, however, was the 2-year Treasury note which hit a new high of 1.571 percent, its highest level since November 3, 2008 when the 2-year yield hit a high of 1.6 percent.
More importantly, the yield curve has gotten to its flattest level since before the financial crisis.
Forecast
Rising Treasury yields are pressuring gold prices at this time. They are being driven higher by expectations of a Fed rate hike in December, speculation that President Trump will appoint a hawkish Fed Chair and optimism that the Republican tax reform plan will be passed as law, signed by President Trump and implemented in January.
All of these factors are potentially bearish for gold prices. Perhaps preventing an even greater collapse in prices at this time, however, are geopolitical concerns over North Korea, Iraq and Iran.
The major story that seems to have been overlooked by the markets on Wednesday involved U.S. tax reform.
Treasury Secretary Steven Mnuchin told Politico the stock market will see a “significant” drop if tax reform is not passed. If this occurs, gold price will spike sharply higher.
The key area to watch today is $1286.80 to $1280.20. Overcoming $1286.80 will indicate the return of buyers. Extending losses under $1280.20 will indicate the selling is getting stronger. Bullish traders are trying to form a potentially bullish secondary higher bottom. Bearish traders are trying to resume the downtrend.
This article was originally posted on FX Empire
