The Daily Market Report: Gold Little Changed as Softer Dollar/Firmer Stocks Create Opposing Forces


USAGOLD/Peter Grant/11-16-17

Gold is up slightly within the range. While the dollar remains somewhat defensive, stocks have rebounded, resulting in opposing forces acting on the yellow metal.

The House appears poised to advance their version of tax reform legislation; likely without any support from the minority party. However, some GOP opposition to the Senate bill has emerged. Senator Ron Johnson of Wisconsin has already said he can not vote for the bill and there are a number of other key Republicans that have not committed.

Political uncertainty is likely to remain elevated in the coming weeks as tax legislation either advances or stalls. The key being, whether a bill will reach the President’s desk before year-end.

In the interim, and likely complicating matters, will be the budget discussion and the debt ceiling in early December. That can got kicked back in September, averting a government shutdown and allowing the majority party to focus on tax reform. However, that can may not have been kicked far enough.

The debt ceiling is back in play on December 8, which may provide the Democrats leverage to impact the tax legislation if something doesn’t get to the President before then. Congress is on Thanksgiving break all of next week and the Christmas recess starts on December 18. There really is very little time to get anything done.

Even if tax reform does get done, the long-term implications to the national debt are likely to be significant. Be assured, the debt ceiling will get raised, albeit perhaps not in a timely manner. As the debt continues to rise, servicing costs will continue to rise as well.

This is all coming to a head just as the Fed contemplates another rate hike at the December 12-13 FOMC meeting. The prospects at that time for fiscal stimulus will certainly weigh in the decision making process, as will the long-term debt trajectory.

This all sets the stage for potentially heightened volatility going into the holidays. With gold and silver still well contained and off the highs for the year, now is likely a good time to be boosting your protective hedges.

Precious metals research and consultancy firm GFMS believes gold has “formed a base for a more sustainable move above $1,300 later this year and to rise still further in 2018 as it averages $1,360 and hits a 2018 peak of almost $1,450.” They cite growing equity market risks and continued geopolitical tensions as forces that will likely push the yellow metal higher.

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