Tax Reform Bill Passage Puts Pressure on Gold

December 4, 2017 - 5:55pm

 by Gary Wagner

In a 51-49 vote, the U.S. Senate passed a tax reform bill early on Saturday morning after a full day of negotiation. Congressional negotiators worked feverishly while making changes to the bill up until a few hours preceding the beginning of the final vote, which occurred at approximately 2 o’clock in the morning.

"We have the votes." Senate Majority Leader Mitch McConnell said while walking to the Senate floor following a conference meeting Friday.

The passage of the bill greatly influenced gold pricing as it reopened for trading on Monday in Australia. Gold prices opened about six dollars lower than Friday’s close. Selling in gold continued as trading resumed for the week in Hong Kong, London, and finally New York.

As of 4 o’clock Eastern standard time, spot gold is currently fixed at $1276.10 which is a net decline of $3.50 on the day. On closer inspection, we can see that today’s decline was all dollars based, with a strengthening U.S. dollar contributing $3.70 of today’s decline. A fractional uptick of $0.20 created by buyers bidding up the precious yellow metal contributed to the final pricing, according to the Kitco Gold Index.

Gold futures also closed lower on the day. However, they were able to close well off of today’s lows which came in at $1273.50. Gold futures based on the most active February contract are currently trading off by three dollars at $1279.30.

Once again it all comes down to risk appetite, which was solid in favoring U.S. equities, for the most part closing marginally higher. The Dow Jones Industrial Average was able to eke out a quarter percent gain on the day to close at 24,290, which is a net gain of 58 points on the day. At the same time, both the NASDAQ composite as well as the S&P 500 did close lower on the day.

Apparently, it was an erroneous news report from ABC on Friday regarding President Trump's role in the ongoing Russian collusion investigation that led to the major spike seen in gold on Friday, as well as a sharp selloff in U.S. equities. However, equities were able to recover by the close of Friday’s session, and gold closed well off of Friday's intraday highs.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer