Butlers remarks come as gold prices remain within striking range of $1,300 an ounce. December gold futures last traded at $1,294.10 an ounce, up 0.53% on the day. Gold is taking advantage of a weaker U.S. dollar, which is trading near a two-month low, and a flatter yield curve, with the spread between two-year and 10-year bonds are up to 57 basis points, a brand-new multi-year low.
” The outlook for gold and rare-earth elements is that macroeconomic news may present near-term headwinds, however the longer-term photo is generally encouraging with significant prospective upside in the coming weeks if the U.S. government stops working to settle on either tax reform or the financial obligation ceiling,” he stated.
In a research note Monday, Jonathan Butler, precious-metals strategist at Mitsubishi, stated U.S. political unpredictability represents the largest potential for the gold market, with the focus on this weeks tax-reform vote and next weeks debt-ceiling vote.
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Uncertainty over the vote is incredibly high, with lots of anticipating to see a close fight as Republicans only hold a slim bulk in the Senate. Republicans can just manage to lose 2 of their own celebrations votes on the legislation.
Muddying the political waters today is the Congressional Budget Office, which Sunday declared its finding that the proposed legislation would raise the national debt by $1.4 trillion dollars; however, the bipartisan workplace did not offer a rating.
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” Failure to agree on tax reform or the debt ceiling might be damaging for risk assets, and specifically for the U.S. dollar while supporting gold as a risk hedge,” Butler stated. “If effective, this could see a return of the Trumpflation trade– supercharging equities and destructive gold.”
All eyes are on Capitol Hill today for a make-or-break vote on tax reform in the U.S. Senate. According to one strategist, the political landscape might identify whether gold will drive above $1,300 an ounce.
