USAGOLD/Peter A. Grant/02-21-17
Gold has rebounded from earlier corrective losses after PMI data disappointed. The yellow metal is now trading higher on the day, more than $12 off its intraday low.
The recovery comes despite today’s firmness in the dollar, which in reality is more a function of euro weakness. The single currency has been hit pretty hard by reports that Marine Le Pen’s lead in presidential polls is growing, along with the attendant Frexit fears.
European Commissioner Pierre Moscovici acknowledged on CNBC today that if Le Pen is elected and follows-through on her pledge to take France out of the EU, it “would be the end of the European project.” While Moscovici doesn’t see any chance for Le Pen to win because she “never even ever won a regional election,” but that clearly is not a disqualifier anymore.
Keep in mind that Itexit and Grexit continue to simmer on the back-burner. The former could easily mark the end of the EU as well, but even the latter could be disruptive in the same way that Brexit has been.
A collapse in the euro amidst rising breakup risks would unquestionably send massive flows into the dollar, but gold would likely benefit as well. A further rise in the greenback would present a very serious conundrum for the Fed as well.