Gold remains in neutral this week, although the precious metal has enjoyed a slight rebound in the past two sessions. After looking oversold yesterday, gold is now trading just above oversold conditions this morning. Given that the White House is widely expected to formally appoint Jerome Powell as the future Fed Chair later today, gold is more likely to continue strengthening in the short-term. Looking at a longer term time frame, we continue to believe that the outlook for the precious metal is weak given accelerating growth and inflation.
While the much anticipated House tax bill was not released last night, Republicans are rushing to release the document today. According to a recent report in the Wall Street Journal, changes to the tax code remain contentious. As we wrote in our commentary of the future tax bill, deductions such as SALT and property taxes remain contentious. This is particularly true for Republicans from high tax states such as New Jersey.
After its most recent top above $1,300, gold is now below $1,277.
Following reports that Jerome Powell may be the next US Fed Chair, we are upgrading gold back to neutral in the short-term. Gold is neither overbought nor oversold today and continues to trade within normal conditions. This is based on various technical indicators on the daily chart.
After weakening in the latter half of October, we are downgrading gold to bearish in the medium-term. As Trump makes progress on the tax reform bill, expectations for future inflation and rate hikes are rising. Given gold's sensitivity to real interest rates, the precious metals is selling off as a result. While gold was looking overbought earlier in October, the precious metal is now trading within normal conditions. This is based on technical indicators on a weekly chart.