Gold Bounces Around $1,275/oz On Wednesday

October 4th, 2017 by

Before all of Wednesday morning’s slate of economic data was released, spot gold was trading above $1,275/oz, up about $4 per ounce, after falling from earlier highs above $1,280/oz.

Spot silver was roughly 0.15% higher to $16.65/oz while platinum and palladium were mixed, virtually in parity with one another at about $910/oz.

Here’s a glance at Tuesday’s closing numbers:

Gold: $1,271.10/oz (+60¢, +0.05%)
Silver: $16.61/oz (+5¢, +0.33%)
Platinum: $910/oz (-$1, -0.11%)
Palladium: $910/oz (+$8, +0.89%)

Dow Jones: 22,641.67 (+84.07, +0.37%)
S&P 500: 2,534.58 (+5.46, +0.22%)
Nasdaq: 6,531.71 (+15.00, +0.23%)
DXY: 93.61 (-0.05, -0.05%)
WTI crude: $50.18/bbl (-40¢, -0.79%)

The leading economic news was this morning’s ADP payrolls report, which showed that 135,000 new jobs were created in the U.S. private sector during September. This stands as the weakest month of job growth in nearly a year. Naturally, the hurricanes that battered the U.S. Southeast are being assigned blame for the disappointing numbers.

Moreover, just as Puerto Rico is dealing with the recovery effort after facing its own pair of hurricanes, the U.S. commonwealth is still mired in its long-standing bankruptcy fiasco. The Caribbean island has been trying to manage its debt obligations, which exceed $120 billion. Thus far, the White House has signaled it’s unwilling to offer Puerto Rico a bailout. It’s worth noting that its lack of U.S. statehood means bankruptcy proceedings offer far less protection for Puerto Rico than states (such as Tennessee) that have declared bankruptcy in the past received.

The dollar was down slightly to 93.4 on the DXY index this morning. Between the ADP private-sector payrolls and the debt problem in Puerto Rico, gold and silver saw a corrective bounce higher. Momentum for the precious metals stalled slightly, however, once market activity picked up in the morning. Bonds saw some demand, with the yield on 10-year T-notes easing to 2.31%. Stocks were mostly lower in Europe yet traded higher in Asia.

More economic data comes out later on Wednesday, with the services PMI (purchasing managers’ index) and composite PMI reading expected to be released at 9:45 am ET.

With regard to the sluggish push for tax cuts, more industry interest groups are entering the debate. The latest concerns are being raised by organizations representing realtors and home builders, who are against the proposed marginalization of the mortgage interest deduction. While the new Trump-GOP tax plan doesn’t necessarily eliminate the deduction, its proposal to vastly increase the standard deduction for taxpayers does make it likely that far fewer homeowners will use the mortgage interest deduction, which would be a blow to the housing market.

There are always “winners and losers” in tax reform, but all parties can agree that the American tax code is a byzantine system that must be simplified if the U.S. economy (and the American consumer) is to remain competitive. The primary worry for investors right now is getting a clear sense of what changes to anticipate, as even the most comprehensive set of reforms proposed to date have still been light on details. Don’t be surprised if the progress of tax reform in Congress swallows up most of the markets’ attention during the fourth quarter. The public was told by Treasury Secretary Mnuchin in February of this year that the tax cuts would be finalized and enacted by the legislature’s August recess, which has obviously already passed with no action taken. The proverbial clock is ticking, and perhaps traders and investors are seeing their patience wane.


The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.