Gold is maintaining a consolidative tone at the low end of the range that has dominated for the past several weeks. Markets are awaiting the release of the House tax plan as well as President Trump’s nomination of the next Fed chair.
The House plan is expected to be focused on a permanent cut to corporate taxes, from 35% to 20%. Additionally, the number of individual income tax brackets are to be cut and the estate tax will be repealed. However, the devil is in the details and those details are likely to have significant implications for the national debt.
Fed Governor Jerome (Jay) Powell is widely anticipated to be nominated to replace Janet Yellen as Fed chair. Powell is a centrist and is likely to perpetuate the current policy tact.
Yesterday’s Fed policy statement did nothing to curtail expectations of a December rate hike. Fed funds futures put the probability at 97%, even though inflation remains below target.
A lot of focus will also be placed on tomorrow’s release of October jobs data. The market is anticipating a sizable rebound in nonfarm payrolls of 318k, following September’s surprising negative print.
As for today’s U.S. data, it has been generally positive with a better than expected rise of 3.0% in Q3 productivity (prelim) and bigger than expected drop in initial jobless claims.
The BoE raised rates by 25 bps today. It was the first hike in a decade and they indicated that 2 more would be needed during the next two years to control prices. With UK inflation running above target, this one may have made some sense, but some are already expressing concern that the BoE is being “too upbeat.”
Sterling has firmed, which is helping to check the upside in the dollar. That in turn, may help to underpin gold investment.