Gold is trading higher on Monday despite firmer equities and a broadly risk-on mood in the global markets. The precious metal is trying to gain bullish momentum as the price is continuing last week’s recovery from a four-month low at $1,236.49. Despite the recent bullish signs, risks for the spot gold still point to the downside. The key risk for the yellow metal is the US tax bill which is expected to be passed by the lawmakers this week. A positive decision will send the U.S.
Treasury yields, equities and dollar higher on the expectations that a major tax cut will spur economic growth in the country. If all goes according to the Trump’s plan, the bill will be adopted in coming days – probably tomorrow. Then the president will sign it into law before Christmas. Such a scenario will boost risk appetite. Thus, it may alleviate immediate upside pressure on gold and allow for weakness back to the $1,2456.77 area and may be lower. Nevertheless, as the markets have largely priced in the tax bill passing, the potential downside pressure on the precious metal will likely be limited.
By Helen Rush