The gold price is slightly lower in today’s European trading session although it is still hovering around 1 month highs as fears grow that US President Donald Trump’s tax plan is on the verge of falling apart.
Roy Moore, candidate from Trump’s Republican Party who is the candidate in the upcoming senate elections for the state of Alabama on December 12th is refusing to step down in light of allegations that he sexually assaulted at least 5 girls while in his thirties.
Up until 2 weeks ago, Moore was a sure thing to get elected but after the Washington post released the devastating news last week, he has slumped in the polls and now the Democratic candidate Doug Jones is favored to win.
So what does this mean for gold?
The US dollar has been powering ahead in recent weeks as expectations grew that Trump would be able to deliver his tax reforms with a comfortable majority in the senate but if he loses Alabama, that majority will become unstable.
It will leave the Republicans with only a one seat margin to pass legislation which means it will only take one senator to cross the floor( At least 2 senators don’t support the new tax policy in its current version) and the deal will fall apart.
This will be devastating for the US dollar and gold will receive a huge boost.
"Friday's move higher has definitely improved gold's chart patterns, but it remains to be seen if this will be enough to attract fresh fund buying," said INTL FCStone analyst Edward Meir.
"Much of this will depend on the progress or lack thereof that the U.S. tax bill makes in the Senate. If efforts to pass it flounder, we could see a much sharper correction set in over U.S. equities, prompting another leg higher in gold," he added.