Gold price stays strong but outlook weighed by potential US political progress  

The gold price has risen in accordance with ongoing tensions in North Korea, and as markets continue to digest the global equity fall. Spot gold at time of writing sits at $1,340.32.

However, rather than potential nuclear conflict, some commentators believe gold’s strength stems more from the lack of a tax-code rewrite or other perceived pro-growth promises that have sent stocks soaring but the dollar flagging.

“It is tempting to blame the rally in gold prices on recent events in North Korea. While these events have helped to create a bid in gold, they only explain [roughly] $15 of the more than $100 [per ounce] rally since mid-July”, said Jeffrey Currie, a Goldman Sachs analyst.

Despite the markets seeming optimistic about the end of the year, with gold for December delivery higher than the spot price, the prediction of a change from $1,330 to $1,250 by year end suggests analysts are banking on progress being made in Washington.

The aftermath of Hurricane Harvey will likely pressure government to get more involved and “overcome partisan differences” by spending on infrastructure and avoid a “government shutdown”, say commentators. Other Goldman Sachs economists have slashed their calculated probability of a government shutdown to 15% from 35%.

Congress ended their summer recess yesterday, so the prospect of legislative change now looks more likely. Carsten Fritsch and the commodities team with Commerzbank, stated in a note that “gold could also fluctuate in response to US domestic politics over the next few weeks”.

“A new spending deal has to be decided by the end of the month in order to avoid the closure of government institutions. The debt ceiling will also have to be raised to avert US insolvency. In addition, the aim is to draw up the tax reform by the end of the year. If there are signs of agreement being reached on any of these points in the near future, this could weigh on the gold price, owing to an expected strengthening of the dollar, which has been lagging as of late.”

Photo credit: narvikk

Link to this article: : http://www.goldmadesimplenews.com/gold/gold-price-stays-strong-but-outlook-weighed-by-potential-us-political-progress-13385/

Posted by on Sep 6 2017. Filed under Gold News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

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