Gold futures finished lower on Wednesday as investors reacted to mixed news. A weaker U.S. Dollar helped support gold prices early in the session. The Greenback fell on expectations of possible delays in long-awaited U.S. tax reforms.
December Comex Gold futures settled at $1283.70, up $7.90 or +0.62%.
The rally was capped by expectations for a Fed interest rate hike in December. Higher U.S. Treasury yields also weighed on gold prices. Yields rose on Wednesday after a better-than-expected Treasury auction.
The U.S. Dollar weakened and stocks dipped during the day after U.S. House of Representatives Speaker Paul Ryan left the door open to a possible delay in implementing a huge corporate tax cut, following a media report that his fellow Republicans in the Senate are exploring the option.
Ryan explained the reasoning behind the possible delay saying, “So what economists tell us … is that you still get very fast economic growth and you actually are encouraging companies to spend on factories and plants and equipment and hiring people sooner with the phase-in.”
December Comex Gold futures are trading a little higher early Thursday. Today is another light economic report day so investors may continue to digest the potentially bullish news about the tax reform delay.
A delay in implementing the corporate tax cuts could be bearish for the dollar and bullish for gold because it may change the way the Fed reads the economy. This may mean the central bank will have to alter the number of rate hikes it expects to make during 2018.
The key level on the chart to watch today is $1286.80. A weaker dollar could trigger an acceleration to the upside on a sustained move over this level. The chart indicates that potential upside targets are $1308.40 and $1312.60.
If the report on tax reform delays fails to gain traction then gold may settle into its month-long range of $1292.90 to $1263.80.
On Thursday, investors will get the opportunity to react to a couple of U.S. economic reports. Weekly Unemployment Claims are expected to come in slightly higher than last week at 232K. Final Wholesale Inventories are expected to rise 0.3%.
Since gold is considered a safe haven asset, traders should continue to watch for any developments out of North Korea that could encourage investors to dump higher risk assets. If there is no fresh news from the Korean Peninsula then the main focus for gold traders will be the direction of U.S. Treasury yields and the U.S. Dollar.
This article was originally posted on FX Empire