After falling sharply yesterday, gold is trading flat this morning. The precious metal was no match against the US dollar yesterday, as the currency rose after Congress passed the 2018 budget resolution. As this paves the way for Trump's tax reforms, optimism is rising that Trump's agenda is about to become reality. US economic data also continues to shine, with better-than-expected factory orders figures and trade balances released yesterday. Strong growth and tax cuts on the horizon means that the 'Trump trade' may be returning. If future inflation expectations continue to rise from here, this may be the start of much lower future gold prices.
While gold is weak, it is currently approaching oversold territory, and may be in danger of pullbacks over the coming days. After its most recent peak close to $1,350, gold is now well under $1,300. The precious metal is currently trading below $1,268.
Gold sold off sharply on October 5, after Congress passed the 2018 budget resolution. As such, our outlook on gold is now back to bearish. The precious metal has been trading in oversold conditions based on various technical indicators on the daily chart. Earlier, gold fell following Yellen's speech in which she reiterated the need to continue hiking rates, despite uncertainty regarding the future path of inflation.
Looking at the medium term picture, we remain bearish on gold. Gold is currently correcting, having entered overbought conditions in early September. The recent bout has accelerated following the Federal Reserve's suggestion that future interest rate hikes are likely and Donald Trump's tax plan. Today, prices have re-entered normal trading conditions when looking at various technical indicators, and gold no longer looks overbought.