Gold has posted considerable gains in the Tuesday session. In North American trade, the spot price for an ounce of gold is $1275.19, down 0.53% on the day. On the release front, JOLT Job Openings edged up to 6.09 million, easily beating the estimate of 5.98 million. Later in the day, Fed Chair Janet Yellen will speak at an event in Washington.
President Donald Trump suffered a humiliating defeat with his failed health care proposal, and the President has now set his sights on tax reform. If Trump is successful, it would mark the first major tax reform since President Reagan was president. Trump wants new legislation in place before the end of the year, but that will be a tall order, as most Democrats have come out against the proposal and not all Republicans are on board. The bill would cut corporate taxes from 35% to 20%, but predictably, Democrat and Republican lawmakers are at odds as to whether the bill will lower taxes for the middle class. Expectations that Trump will cut taxes has been the catalyst for a stock market rally over the past year, and if the bill does become law, investor risk appetite could increase and send gold prices downwards.
The Federal Reserve was in the spotlight last week, as President Trump nominated Jerome Powell to replace Fed Chair Janet Yellen. The changing of the guard will take place in February, when Yellen’s 3-year term expires. Powell is expected to maintain the Fed’s cautious monetary policy, which entails small, incremental rate hikes. Coming on the heels of that announcement, FOMC member William Dudley announced that he will retire in mid-2018. This move could have implications for monetary policy, depending on who will replace Dudley. A possible candidate is Kevin Warsh, who made the short list for the successor to Fed Chair Janet Yellen. Warsh is in favor of higher rates and favors less regulation of the banking sector, and if he would certainly support a more hawkish stance on monetary policy.
