Gold fell back into the range in early U.S. trading, driven by heavy selling in the futures market after an upward revision to Q3 GDP. That puts the yellow metal back around the midpoint of the well defined 1260.10/1306.04 range that has dominated for more than a month.
Generally good economic data of late has reinforced expectations of a December rate hike, even though Janet Yellen continues to be surprised by “subdued” core inflation. Supposedly, that’s the main reason that the Fed decided to pause their tightening cycle back in September.
October PCE data are out tomorrow, so we’ll see if the central bank’s preferred measure of inflation picked up at all last month. While Yellen continues to think the weakness is transitory, one has to wonder how long this must go on before she changes her tune.
Also weighing on gold is ongoing strength in the stock market, which has been bolstered by optimism about the GOP tax overhaul, which includes a substantial cut to corporate taxes. If the Senate votes along party lines the legislation will clear the Senate, but the Republicans can ill afford any defectors or abstentions.
Senators Ron Johnson (R-WI) and Steve Daines (R-MT) they oppose the legislation in its present form. There are also at least four Republican Senators that have legitimate concerns about how this legislation will impact deficits and the national debt, and even more on the fence for various other reasons.
Nonetheless, the market likes the fact that the legislation continues to move through the process. Whether something gets to the President’s desk before year-end is still very much in doubt.
Perhaps further complicating the matter is the fact that Congress needs to come up with a budget plan by the end of next week, and raise or suspend the debt ceiling. “I don’t see a deal,” said President Trump via Twitter yesterday. Or of course, they could kick that can yet again.