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Blunt Fed tips gold see-saw higher

LATE REPORT

Gold was up today continuing the mercurial, see-saw performance that has dominated its price action over the past several weeks.  Finishing at $1292, gold was up $11.50 on the day and pretty much ended this shortened week (for all intents and purposes) where it started.  Silver was up 20¢ on the day finishing at $17.15, but down about 14¢ on the shortened week.

The minutes to the most recent Federal Reserve meeting reveal a governing committee genuinely concerned about the price levels in the stock market and the possibility for “a sharp reversal in asset prices [that] could have damaging effects on the economy.” Blunt as it is, that assessment is likely to stick in both peoples’ minds and the financial markets’ repertoire for weeks to come as we move to the end of 2017.  The gold market seems to have taken it as a caution on raising interest rates as well as a warning from on high.

Quote of the Day
“In a goldilocks scenario of low interest rates, abundant liquidity, stable growth and a focus on the ‘good’ Trump, investors continue to push asset prices, volatility and leverage to historical extremes. Yet, a low volatility carry environment with rather extreme positioning is a dangerous combination, which we recently likened to dancing on the rim of a volcano.” – Alain Bokobza, head of global asset allocation, Societe Generale


What is this important chart telling us about future Fed policy?
And what does it mean for the gold market?

Find out in the current issue of our newsletter.
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Gold regains 1290.00 ahead of release of FOMC minutes.

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Posted in Gold News, Gold Price, Gold Views |

A key recession indicator is getting closer to the danger zone — and the Fed can’t ignore it

BusinessInsider/Pedro Nicolaci da Costa/11-21-17

In the past, including before the Great Recession, an inverted yield curve — where long-term interest rates fall below their short-term counterparts — has been a reliable predictor of recessions. The bond market is not there yet, but a sharp recent flattening of the yield curve has many in the markets watchful and concerned.

The US yield curve is now at its flattest in about 10 years — in other words, since around the time a major credit crunch of was gaining steam. The gap between two-year-note yields and their 10-year counterparts has shrunk to just 0.63 percentage points, the narrowest since November 2007.

…”We believe a pre-condition for the Fed to continue its hiking cycle in 2018 should be higher intermediate and long-term rates,” they wrote in a research note to clients. “Without the latter, we would have doubts on the former.”

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Posted in Central Banks, Fed, Monetary Policy |

Gold inches up as dollar dips ahead of Fed meeting minutes

Reuters/Vijaykumar Vedala/11-22-17

Gold prices crept up on Wednesday amid a softer dollar, with investors remaining cautious ahead of the release of minutes from the U.S. Federal Reserve’s last meeting, which could offer hints on the outlook for the central bank’s monetary policy.

…”We are not really sure that this (Fed meeting minutes) will have much of an impact given that the decision to raise rates in December is pretty much a forgone conclusion,” INTL FCStone analyst Edward Meir said.

“Nevertheless, we suspect that investors will want to see what policymakers are thinking about the rate situation and how aggressive they will be on this front going forward.”

PG View: The market thinks a December rate hike is a foregone conclusion, but does the Fed? What if PCE data out next week reflects continued weakness in inflation? That’s the reason the Fed put the tightening cycle on pause back in September.

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Posted in Gold News, Gold Price, Gold Views |

University of Michigan consumer sentiment 98.5 in Nov (final), above expectations of 98.0, vs 97.8 prelim. Down from 100.7 in Oct.

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Posted in Economic Data |

UK growth forecast cut sharply

BBC/11-21-17

Growth forecasts for the UK economy have been cut sharply following changes to estimates of productivity and business investment.

The Office for Budget Responsibility (OBR) now expects the economy to grow by 1.5% this year, down from the estimate of 2% it made in March.

Growth, it says, will drop to 1.3% by 2020 and then rise to 1.5% in 2021.

PG View: Sub-2% growth projected through 2021 is going to keep the BoE accommodative for the foreseeable future.

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Posted in Economy |

Morning Snapshot: Gold Firms Within the Range

USAGOLD/Peter Grant/11-22-17

Gold is up in early U.S. trading, lifted by a softer dollar. More than half of Monday’s sharp intraday sell-off has now been retraced, leaving the low end of the recent range well protected.

U.S. initial jobless claims fell 13k to 239k in the week ended 18-Nov, just below expectations of 240k. However, October durable goods orders really missed the mark, tumbling 1.2% on expectations of a rise of 0.5%. Septembers solid gain was trimmed to +2.0%, from +2.2% previously.

Core capital goods orders fell 0.5%. New orders plunged 5.1%. Nondefense aircraft orders -18.6%. Defense aircraft orders -11.3%.

It would seem the boost derived from recent aircraft orders and the hurricanes has come to an end. Look for some downward adjustments to Q4 GDP expectations. Rate hike expectations may get tempered as well, particularly if next week’s PCE data continues to reflect weak inflation.

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Posted in Gold News, Gold Price, Gold Views, Snapshot |

U.S. durable goods orders -1.2% in Oct, well below expectations of +0.5%, vs negative revised +2.0% in Sep.

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Posted in Economic Data |

U.S. initial jobless claims -13k to 239k in the week ended 18-Nov, just below expectations of 240k.

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Posted in Economic Data |

Gold higher at 1286.08 (+4.77) Silver 17.02 (+0.02). Dollar lower. Euro higher. Stocks called higher. U.S. 10-year 2.36% (+1 bp).

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Posted in Gold Price, Markets, Silver Price |

The Daily Market Report: Gold Firms Intraday, Leaving Low End of Range Protected


USAGOLD/Peter Grant/11-21-17

Gold is up modestly in U.S. trading, buoyed by a softer dollar and seemingly ignoring the sharp rise in stocks. Yesterday;s low at 1273.90 provides an additional intervening barrier ahead of the range lows in gold at 1263.00/1260.10.

FedSpeak from Yellen after the close may provide some insight into the true prospects for a December rate hike. However, the minutes from the November FOMC meeting out tomorrow will likely be more valuable in that regard.

Decent to good U.S. economic data of late, reinforces market expectations that the Fed will indeed boost the Fed funds rate by another 25 bps on December 13. Fed funds futures indicate a 91.5% probability of such a move.

UBS is predicting that the dollar will have a rough 2018, particularly against the euro. This would be a perpetuation of the trend that developed this year, where the greenback fell more than 10% against the single currency.

If the dollar has a rough year, it bodes well for another good year for gold. The yellow metal is up 11.2% YTD and as we mentioned in Friday’s DMR, this is the first time in 4-years that such resiliency has been seen going into year-end.

Gold has sold off into year-end for the past 4-years, premised largely on expectations of Fed tightening (either QE tapering or actual rate hikes). This year — with another rate hike decidedly on the table — gold remains resilient. The yellow metal is a mere 4.7% off the high for the year at 1357.50.

The ECB has been talking out of both sides of its mouth in recent weeks, making rumblings about tapering and then saying it intends to keep its foot on the gas. The fact that it cut monthly asset purchases, but plans to do them for longer is reflective of these mixed signals.

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Posted in Daily Market Report, Gold News, Gold Price, Gold Views |

“Foundation For A Rebound?” – Gold Jumps Above Key Technical Level On Heavy Volume

ZeroHedge/Tyler Durden/11-21-17

The last 3 days have been ‘noisy’ in precious metals markets with gold swinging from the best day in 5 months to the worst day in 4 months and now to another high volume surge, breaking the barbarous relic back [above] its 100-day moving-average…

It seems the 100DMA is a key level with heavy volume being used to push gold futures around it.

UBS asks “Is gold establishing a foundation for a rebound?”

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Posted in Gold News, Gold Price, Gold Views |

U.S. existing home sales rose 2.0% to a 5.48M pace in Oct, above expectations of 5.41M, vs negative revised 5.37M in Sep.

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Posted in Economic Data |

Dollar set for rough 2018 as the euro pushes higher, UBS predicts

CNBC/Holly Ellyatt/11-21-17

The U.S. currency is set to have a disappointing 2018 against the euro despite the Federal Reserve continuing its current cycle of rate hikes into next year, according to currency experts at UBS.

A rise in benchmark rates is usually beneficial for the dollar as more people flock to U.S. assets in anticipation of higher yields. But Swiss investment bank and financial services group UBS believes the euro will out-muscle anything the greenback does next year. So far in 2017, the euro is up nearly 11.5 percent against the dollar.

“What matters for dollar is not the timing of the next hike,” UBS strategists said, but “how far the Fed is likely to tighten over the cycle; and the market already expects a fair amount.”

PG View: If the dollar has a rough year ahead, gold is likely to have a good year on the heels of what has been a pretty decent year in 2017.

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Posted in U.S. Dollar |

Gold advances, U.S Fed minutes in focus


Reuters/Zandi Shabalala/11-21-17

Gold rebounded on Tuesday as investors anticipated signals on the direction of U.S. monetary policy from the minutes of a November Federal Reserve meeting.

…”The Fed rate hike in December is roughly priced in and unless there are very hawkish minutes, its more that people are looking for direction about future moves,” said Georgette Boelle, a commodity strategist at ABN AMRO.

The minutes are due on Wednesday.

Gold was also profiting from a political crisis in Germany, Europe’s largest economy, boosting bullion’s safe-haven appeal.

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Morning Snapshot: Gold Defensive Back in Lower Half of Range

USAGOLD/Peter Grant/11-21-17

Gold is down this morning, back in the lower half of the range after coming under selling pressure during the U.S. session yesterday. The bottom of the range is well defined at 1263.00/1260.10 and remains protected at this point.

The Chicago Fed national activity index for October came in better than expected. Later this morning we’ll get October existing home sales, which are expected to edge higher to a 5.410M pace.

After the close, Fed chair Yellen will speak at NYU along with former BoE Governor Mervy King. The minutes from the November FOMC meeting will be released tomorrow. The latter will perhaps provide a better window into the Fed’s thinking going into year-end. Is soft inflation still a concern? Is the Fed angling for another rate hike, regardless of the inflation outlook?

Thursday is of course the Thanksgiving holiday. Markets are open on Friday, but trading is historically very thin.

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Posted in Gold News, Gold Price, Gold Views, Snapshot |

Chicago Fed National Activity Index rose to 0.65 in Oct, above expectations of 0.20, vs positive revised 0.36 in Sep.

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Posted in Economic Data |

Gold easier at 1278.20 (-1.25). Silver 16.95 (unch). Dollar better. Euro lower. Stocks called mixed. U.S. 10-year 2.36% (+1 bp).

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Posted in Gold Price, Markets, Silver Price |

Gold reverses Friday’s gains, another mysterious mega-trade

Gold reversed today what it gained on Friday finishing down $17.25 at $1276.63.  Silver followed suit giving up 39¢ and finishing the day at $16.89.  Again today, gold and the Japanese yen were traveling partners, and now with the yen recovering in Asian trading gold has perked up as well (up $3 in the overnight market at $1279.50).  There was little in the way of news to justify the price drop – just a huge 15,000 contract dump  in a matter of seconds at the COMEX open reminiscent of a similar mysterious mega-trade last week. By the way, the U.S. federal government just went over $80 billion in additions to the national debt in November – quite a pace as we move to the end of 2017.

Quote of the Day
“Gold traders are having to grow more accustomed to surges in trading volume as spikes that began surfacing around mid-year become more frequent. In the 10 minutes ended 3:10 a.m. in New York on Tuesday, when most North American traders were probably still asleep, contracts representing more than 2 million ounces of the metal changed hands on the Comex, sending prices down as much as 0.7 percent. The bulls responded hours later, with trades covering more than 3.5 million ounces at around 10 a.m., helping to push the price higher.” – Luzi-Ann Javier, Bloomberg


From the October, 2017 issue of News & Views. . . . .

“In fact, institutional involvement may be unprecedented at this juncture and it is not just the high-profile gold advocates like Ray Dalio, Stanley Druckenmiller and David Einhorn pumping capital into the market, but hundreds of funds and institutions from one end to the globe to the other.

It came to light this past month, for example, that almost 3000 tonnes* of gold in physical form sit on the balance sheets of Chinese commercial banks and financial institutions – a surprising revelation. In the West, inventories at gold ETFs, the favored gold ownership vehicle for professional investors, have gone from 2050 tonnes in late 2015 to just under 2770 tonnes now – a gain of 720 tonnes or 35%. Last month, the World Gold Council (WGC) published a report showing that European funds accounted for 79% of the overall growth in gold ETFs in 2017 with German funds and institutions accounting for half of those inflows.”

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All the Reasons Cryptocurrencies Will Never Replace Gold as Your Financial Hedge

RiskHedge/Olivier Garret/11-17-17

Despite what the crypto-evangelists will tell you, digital tokens will never and can never replace gold as your financial hedge.

Here are six reasons why.

#1: Cryptocurrencies Are More Similar to a Fiat Money System Than You Think.

#2: Gold Has Always Had and Will Always Have an Accessible Liquid Market.

#3: The Majority of Cryptocurrencies Will Be Wiped Out.

#4: Lack of Security Undermines Cryptocurrencies’ Effectiveness.

#5: Hype and Speculation Continue to Drive Cryptocurrencies’ Value.

#6: Cryptocurrencies Do Not Have Gold’s History as a Store of Value.

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Posted in Cryptocurrency, Gold News, Gold Price, Gold Views |

The Daily Market Report: Gold Retreats Into Range After Stalling Ahead of $1300


USAGOLD/Peter Grant/11-20-17

Gold is down in U.S. trading after tests of the upside late last week stalled shy of $1300. Stronger than expected U.S. leading indicators for October buoyed stocks and the dollar, which weighed on the yellow metal.

U.S. leading indicators rose 1.2% in October, well above expectations of +0.5%, versus a positive revised +0.1% in September (was -0.2%). This reading further reinforces expectations for a 25 bps rate hike when the FOMC meets December 12-13. Such a move has been essentially fully priced in by the markets since shortly after the Fed opted to pause the tightening cycle back in September because of soft inflation data.

While inflation data have firmed somewhat since the hurricanes, it remains to be seen whether these price pressures are sustainable. The Fed will get a look at October PCE data a couple weeks prior to the FOMC meeting. This is the Fed’s preferred measure of inflation and hints of renewed weakness could prompt a rather rapid unwind of positioning premised on the all-but assured expectations of a rate hike.

Fed Chair Janet Yellen announced today that she will leave the Fed once her successor is seated. Jerome Powell has been nominated to be the next Fed chair and is expected to get approved by the Senate. That will give President Trump another position to fill at the Fed. We’ll hear FedSpeak from Ms. Yellen tomorrow.

With gold back on the ropes within the range, a breakout in this holiday shortened week is looking unlikely. Recent pullbacks within the range however have been viewed as buying opportunities. Support is well defined at 1263.00/1260.10.

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Posted in Daily Market Report, Gold News, Gold Price, Gold Views |

The stock market is ‘dancing on the rim of a volcano,’ warns investment bank

CNBC/Fred Imbert/11-20-17

Investors are too optimistic and taking on too much risk in this low volatile environment, setting the stock market up for a potential downfall, according to strategists at investment bank Societe Generale.

“In a goldilocks scenario of low interest rates, abundant liquidity, stable growth and a focus on the ‘good’ Trump, investors continue to push asset prices, volatility and leverage to historical extremes,” said Alain Bokobza, head of global asset allocation at Societe Generale, in a report Monday. “Yet, a low volatility carry environment with rather extreme positioning is a dangerous combination, which we recently likened to dancing on the rim of a volcano.”

PG View: Today’s pullback in gold may be a great opportunity to hedge your exposure to frothy stocks.

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Posted in Markets |

Trump names North Korea a state sponsor of terrorism

CNN/Dan Merica & Jeremy Diamond/11-20-17

President Donald Trump, in the latest demonstration of increased tensions on the Korean Peninsula, placed North Korea back on the list of state sponsors of terrorism.

Trump announced the move Monday during a public meeting with his Cabinet at the White House and said the Treasury Department will announce new sanctions against North Korea on Tuesday.

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Posted in Geopolitical Risks, North Korea |

‘New normal’ of geopolitical risk likely to boost gold prices in coming years, Citi forecasts


CNBC/Sam Meredith/11-20-17

Gold prices are likely to be buoyed by the “new normal” of elevated geopolitical tensions over the coming years, Citi analysts said Monday.

The geopolitical case for gold investment has been emboldened in recent months and it seems as strong today than at any point over the last four decades, Citi analysts said. As a result, gold prices were forecast to “push north of $1,400 per ounce for sustained periods” through to 2020.

…”Event-driven bids for gold seem to be occurring more frequently and may be the new normal… In short, even as the rates and forex channel dominate the outlook for gold pricing, the yellow metal is increasingly being used by investors as a policy and tail risk hedge,” Citi said.

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Posted in Gold News, Gold Price, Gold Views |

Gold slips on stronger dollar, but holds near one-month high

Reuters/Pratima Desai/11-20-17

Gold slipped on Monday as the dollar rose, but prices still held near one-month highs hit last week as political and economic uncertainty in the United States dominated sentiment.

…The dollar gained against the euro after German Chancellor Angela Merkel’s efforts to form a three-way coalition government failed. Merkel said she would inform the German president that she could not form a coalition, after the pro-business Free Democrats (FDP) withdrew from negotiations.

…”For gold, there are headwinds in the guise of U.S. interest rate rises, which means higher front-end bond yield curves and an opportunity cost for holding gold,” said Societe Generale analyst Robin Bhar.

PG View: I would point out that the December rate hike remains fully priced.

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Posted in Gold News, Gold Price, Gold Views |

Gold retreats deeper into the range after LEI beat lifts stocks and dollar.

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Posted in Economic Data, Gold Price |

U.S. leading indicators +1.2% in Oct, well above expectations of +0.5%, vs positive revised +0.1% in Sep.

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Posted in Economic Data |

Merkel dealt a blow as talks to form German government collapse


CNN/Judith Vonberg, Ben Westcott & Jonny Hallam/11-20-17

Germany was plunged into political uncertainty Monday after talks to form the country’s next government collapsed overnight, dealing a blow to Angela Merkel and raising questions about the future of the longtime Chancellor.

Merkel’s party had spent weeks trying to cobble together a ruling coalition with three other parties, but the plan fell apart when the liberal Free Democratic Party (FDP) walked out of talks shortly before midnight on Sunday over disagreements on issues ranging from energy policy to migration.

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Posted in Politics |

Morning Snapshot: Gold Easier Within Range

USAGOLD/Peter Grant/11-20-17

Gold is down modestly to start the holiday shortened week, but the tone within the range remains generally favorable after solid gains on Friday. Focus remains on the next tier of resistance at 1306.04/1308.80 (16-Oct high and 50% retracement of the entire move from 1357.50 to 1260.10).

Political and geopolitical tensions, along with recent weakness in stocks and the dollar, are all helping to underpin the yellow metal within the well defined range.

Negotiations in Germany to form a coalition government collapsed last night after the Free Democratic Party (FDP) walked out. The reaction in Europe has been muted thus far, with the euro recovering from initial losses. However, the risks may be considerable.

The U.S. economic calendar is light today with just October leading indicators. Expectations are for a 0.5% rise, after a 0.2% decline in September.

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Posted in Gold News, Gold Price, Gold Views, Snapshot |