Gold is maintaining a consolidative tone in the lower half of the well defined range. Heightened risk appetite is limiting the upside for gold, as optimism over the tax overhaul boosts stocks.
The question now becomes, how quickly can Congress reconcile the House and Senate versions of the legislation? And what will that final version look like?
With the Christmas recess just a couple weeks away, the window did get something to the President’s desk before year-end is pretty small. Further complicating matters is the need to get at least a temporary spending measure in place before December 8.
Democrat leaders have reportedly agreed to a White House meeting on December 7, which again doesn’t give them much time to reach an arrangement. A similar meeting was scrubbed last week after President Trump chided Chuck Schumer and Nancy Pelosi via Twitter for some of their alleged demands and then said he didn’t “see a deal.”
The market is already looking ahead to Friday’s release of November jobs data and next week’s FOMC meeting. Median expectations for nonfarm payrolls is +198k, with the unemployment rate holding steady at 4.1%. Expectations for a rate hike continue to hover around 90% probability.
St. Louis Fed President James Bullard said last week that “there is a material risk of yield curve inversion over the forecast horizon if the FOMC continues on its present course of increases in the policy rate.” An inverted yield curve is a reliable indication of an impending recession so the implication here is that the Fed might want to stay on pause to prevent that from happening.
The market doesn’t seem to care; perhaps because Bullard is not a voter this year. However, there are other doves on the committee that do get a vote.