Opinion with Peter Hug
Gold May Be Poised To Break Out
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
(Kitco News) - The suggestion that the tax-cut plan may be pushed to 2019 hit both the equity markets and the dollar yesterday but flows into the bond market pushed yields higher, which muted the effect on gold prices. The mere suggestion that the tax plan may be delayed until 2019 rattled the financial markets that are fully pricing in tax relief for corporations and expanded fiscal programs.
Risks in the financial markets continue to increase, which at a minimum suggests a floor building for gold. Until there is clarity on the financial reforms, gold remains a viable trade. One word of caution would be that the initial reaction of gold prices may be lower, should the equity market accelerate to the downside. Investors are likely to remain with the equity trade as the market drops and sell liquidity, gold, to meet margins or average lower. We would expect volatility to begin to increase as well, as the tax debate intensifies.