Gold futures traded in tight, two-sided range on Thursday after the U.S. House of Representatives passed its version of sweeping tax cuts and rising expectations of an interest rate hike by the U.S. Federal Reserve in December.
December Comex Gold futures settled at $1278.20, up $0.50 or +0.04%.
Traders said that gold continues to be pulled in both directions due to pressure from the prospect of a rise in U.S. interest rates and support from uncertainty about U.S. fiscal policy.
The key market driving event on Thursday was the passing by the House of its version of tax reform. The U.S. House of Representatives approved a broad package of tax cuts affecting businesses, individuals and families on Thursday, moving Republicans and President Trump an important step closer to the biggest tax code overhaul in a generation.
Additionally, a series of economic reports on Thursday did nothing to derail the Fed’s plans to raise interest rates in December.
Weekly Unemployment Claims unexpectedly rose last week in part as a backlog of applications from Puerto Rico continued to be processed. U.S. import prices rose less than expected in October as an increase in the cost of imported petroleum and capital goods was offset by a decline in food prices.
The Fed said industrial production accelerated 0.9 percent last month with output at factories surging 1.3 percent. The Capacity Utilization Rate came in at 77.0%, beating the 76.3% estimate. The Philadelphia Fed showed its index of factory activity in the mid-Atlantic region fell to a reading of 22.7 this month from 27.9 in October, manufacturers reported robust demand for their products, rising backlog and declining inventories.
Finally, San Francisco Fed President John Williams reiterated his view on Thursday that the U.S. economy is growing strongly enough for the Fed to continue raising rates gradually over the next couple of years to around 2.5 percent.
Cleveland Fed President Loretta Mester also made hawkish comments, saying she feels inflation is poised to pick up, clearing the way for the Fed to continue its gradual process of raising interest rates.
Gold prices are recovering nicely early Friday as investors react to fresh political news regarding the Trump Administration.
Demand for gold increased as the dollar weakened after a report that investigators looking into a possible Russian interference in the 2016 U.S. presidential election had subpoenaed President Donald Trump’s election campaign for documents.
The Wall Street Journal is reported late Thursday that Special Counsel Robert Mueller’s team issued the subpoena last month for documents containing specified Russian keywords from more than a dozen officials.
The news about the Trump Administration is likely to solidify the bid in the market, but uncertainty over tax reform and the expected Fed rate hike in December is likely to keep a lid on prices.
On Friday, traders will get the opportunity to react to reports on Building Permits and Housing Starts.
Gold is going to have to take out $1290.00 with conviction in order to trigger an acceleration to the upside. Otherwise, were likely to straddle $1276.90 over the near-term.
This article was originally posted on FX Empire
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