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BBH: U.S. Markets Eye Tax Reform, Powell Hearings, Fed, Data

Kitco News

Key events in the U.S. that investors will be monitoring this week include tax reform; confirmation hearings for Jerome Powell, who has been nominated as next chief of the Federal Reserve; speeches by Fed officials; and economic data, says Brown Brothers Harriman. Analysts say a Senate tax bill likely will be brought to the floor on Thursday. “We expect it to come down to the wire but suspect the risk is that there are at least three Republican Senators of the 52 that will vote against the bill,” BBH says. “It would not end the effort, any more than a similar defeat meant the Affordable Care Act is safe. Although the disappointment could spur a knee-jerk reaction, the medium-term implications may be constructive. If it does pass, we suspect it would provide fodder for the equity market and could spur a steepening of the yield curve.” Meanwhile, hearings for Powell begin Tuesday. BBH notes he has never registered a dissent as a Fed voting member, suggesting he represents “a strong element of continuity.” Meanwhile, at least seven Fed officials are scheduled to speak in the coming days, including Chair Janet Yellen's mid-week testimony before the Joint Economic Committee of Congress. “The market remains confident of a rate hike next month,” BBH says. Of the economic data, two reports may stand out, BBH says, listing a revision to third-quarter growth in gross domestic product and an inflation indicator the Fed is thought to target – the core personal consumption expenditures deflator. “The initial estimate of Q3 GDP is expected to be revised to 3.2% from 3%, with stronger consumption a key factor, though perhaps goosed by quick rebuilding-related demand after the horrific storms,” BBH says. The core deflator is expected to rise to 1.4% in October. “The bond market will be sensitive to any surprise, and through it, the dollar,” BBH says.  

By Allen Sykora of Kitco News; asykora@kitco.com

 

MKS: Gold Above 50-, 100-Day Averages; Market Eyes Tax Reform

Monday November 27, 2017 08:06

Gold is holding above support that includes the 50- and 100-day moving averages while traders watch to see what happens with proposed tax reform in the U.S., says Sam Laughlin, senior trader with MKS (Switzerland) S.A. He describes demand in Asian trade Monday as “muted,” with the Shanghai onshore premium easing toward $6 and Indian interest “close to non-existent with the metal trading in and out of a small discount recently.” Gold was able to recover in the Asian afternoon after early weakness, Laughlin says. “Over the short term, bullion will look to hold support around $1,283.50, [near where] both the 50 DMA and 100 DMA currently sit, with all eyes on developments regarding the proposed U.S. tax reforms and the U.S. GDP [gross domestic product] print on Wednesday,” Laughlin says. “Top-side interest develops broadly between the recent high watermark of $1,295-$1,296 and the psychological $1,300 figure.” As of 8:02 a.m. EST, spot gold was $7.50 higher to $1,294.80 an ounce.

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