Gold has posted slight gains in the Tuesday session. In North American trade, the spot price for an ounce of gold is $1274.56, up 0.27% on the day. There are no major US events on the schedule. On Wednesday, the US releases two key events – the ADP Nonfarm Payrolls and the ISM Nonfarm Manufacturing report. As well, Federal Reserve Chair Janet Yellen will speak at an event in hosted by the St. Louis Fed.
After failing to pass a new health care act through a skeptical Congress, Donald Trump has now set his sights on tax reform, another key campaign pledge from Trump’s election campaign. Last week, the White House announced the new tax proposal, called the Unified Tax Reform Framework, which includes lowering corporate and personal income taxes. However, the plan is sketchy and short on specifics, most importantly, how will the plan be paid for? Trump has insisted that the cuts will trigger strong economic growth which will more than pay for itself. However, Moody’s, the well-respected credit rating company, is not impressed by the rhetoric. On Monday, Moody’s said that the tax plan is "likely credit negative", arguing that tax cuts would not be offset in spending cuts, which would result in a higher federal budget deficit and debt. The reduction in federal government revenue would negatively affect the US credit rating. Some Republican lawmakers have already come out against the plan, so it appears that the proposal will have an uphill battle to pass through the House of Representatives and the Senate.
US manufacturing indicators have been pointing upwards, as a stronger global economy has led to increased demand for US goods. The positive trend continued on Monday, as ISM Manufacturing PMI, the primary gauge of manufacturing activity, accelerated in September to 60.8 points. This reading indicated strong expansion, and was the indicator’s highest level since April 2011. Gold prices reacted to the sharp reading with losses. Gold has been in retreat, as prices declined 3.2 percent in September. With the North Korean conflict again on the back burner and the US continuing to post strong numbers, investors have a renewed appetite for riskier assets, which has weighed on safe-haven gold. On Wednesday, the US releases key employment and services data, and if these releases beat expectations, gold prices could drop lower.
