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Gold falls but doubts over Trump tax plan cap losses

Gold is being pulled down by descending global risk sentiment. But the market is still worried about whether U.S. tax cut policy would be carried out as the rate cut is too steep

business Updated: Apr 27, 2017 15:15 IST
gold
(Reuters photo)

Gold prices edged down on Thursday as global risk sentiment ebbed, but scepticism over U.S. President Donald Trump’s tax reform plan curbed further losses.

Spot gold was down 0.3% at $1,264.60 per ounce as of 0736 GMT. Bullion prices edged away from a two-week low of 1,259.90 hit on Wednesday.

U.S. gold futures climbed 0.1% to $1,265.90 an ounce.

“Gold is being pulled down by descending global risk sentiment... But the market is still worried about whether (U.S. tax cut) policy would be carried out as the rate cut is too steep...,” a trader with a Shanghai-based bullion bank said.

President Donald Trump unveiled a one-page plan on Wednesday proposing deep U.S. tax cuts, many for businesses, that would make the federal deficit balloon if enacted, drawing a cautious welcome from fiscal conservatives and financial markets.

“I think they are trying to attract business to the U.S., which is good for the economy and stock market, and thus a negative impact towards the gold price,” said Spencer Campbell, general manager with Kaloti Precious Metals in Singapore.

“We have to see whether or not he could pass the bill... sentiment would be driven the other way should he not be able to pass that bill.”

Gold has struggled to make effective rallies as the previous week’s geopolitical tensions fade from traders’ minds, said Jeffrey Halley, senior market analyst, OANDA.

“From a technical perspective, gold still appears to be setting itself up for a meaningful correction lower with nearby support at $1,254, the 200-day moving average.”

Spot gold still targets $1,249 per ounce, as it has pierced below a support at $1,265, according to Reuters technical analyst Wang Tao.

The markets are also waiting for the European Central Bank’s upcoming monetary policy decision, where it is set to keep its ultra-easy policy stance firmly in place.

Silver slipped 0.1% to $17.45 an ounce after hitting its lowest in over a month in the previous session at $17.28.

Platinum gained 0.3% to $944.90 an ounce and palladium dropped 0.1% at $807.20 an ounce.