Gold Jumps Most in a Week on Conflicts in Ukraine, Gaza

25-Jul (Bloomberg) — Gold and silver futures jumped the most in a week as escalating havoc in Eastern Europe and the Middle East boosted demand for haven assets.

Ukraine and Russia traded accusations of cross-border shelling as tensions between the ex-Soviet neighbors intensified. Gaza Strip violence expanded after dozens of Palestinians and 13 Israeli soldiers died in the conflict’s bloodiest single day.

Gold has climbed 8.6 percent this year. Fighting this month in Gaza has killed more than 800 Palestinians and 35 Israelis, roiling a region in upheaval from Iraq to Yemen. Russian President Vladimir Putin is facing more pressure to expedite the investigation into the crash of a Malaysian passenger jet on July 17 in Ukraine.

“When you see schools shelled in Gaza and heavy artillery fire from Russia and Ukraine, people are very nervous, and you can’t blame them,” Peter Thomas, a senior vice president at Zaner Group LLC in Chicago, said in a telephone interview. “As we go into the weekend, with the amount of turmoil that we have, people are going to buy gold.”

[source]

Posted in Geopolitical Risks |

As Ukraine Forces Make Headway, Russia Is Said to Step Up Role

25-Jul (New York Times) — Russia has stepped up its direct involvement in fighting between the Ukranian military and separatist insurgents, unleashing artillery attacks from Russian territory and massing heavy weapons along the border, Ukrainian and American officials say.

Russia’s aim, the officials say, appeared to be to stem and perhaps roll back gains made by government forces, who have been retaking rebel-held territory and trying to seal the border. They say Russia’s accelerated intervention raises the prospect of more direct and more heated fighting between Ukraine and Russia.

American officials, citing military intelligence, including satellite images, warned that Russia appeared to be preparing to arm the rebels with more high-powered weaponry than it has previously supplied, including tanks, armored vehicles and powerful Tornado multiple rocket launchers.

[source]

Posted in Geopolitical Risks |

The Daily Market Report: Gold Regains $1300 On Geopolitical Tensions and Weaker Stocks


25-Jul (USAGOLD) — Gold rebounded ahead of the weekend, trading back above the $1300 level. Persistent geopolitical risks and weaker stocks are offering support to the yellow metal. However, a firm dollar remains an impediment on the upside.

The dollar index jumped to a new 5-month highs, more on euro weakness than any true dollar strength. A surprise decline in German business sentiment was the catalyst for a drop in the single currency to an 8-month low.

The dollar got an additional boost from a slightly better than expected U.S. durable goods print for June, but it wasn’t enough to recoup the terrible (negatively revised) 1.0% decline seen in May. Accordingly, there have been further negative revisions to Q2 GDP expectations.

Evident growth risks in Europe continue to stoke expectations that the ECB will have to ease further in an effort to prevent yet another retreat into recession. While U.S. economic data continues to encourage the optimists, it hasn’t been robust enough to to swing the pessimists.

U.S. advance Q2 GDP comes out next week. Median expectations are running around +2.9%, which strikes me as wildly optimistic in light of the -2.9% Q1 results and the data that have come out subsequently. Certainly, if the advance number is sub-2%, expectations of a Fed rate hike would likely get pushed toward the end of 2015. If the number is really bad, the Fed may have to consider un-tapering at that point to avert recession; or at a minimum try to ensure it’s a short recession.

Meanwhile, fighting rages in Ukraine, Gaza and Syria:

Ukrainian Troops Recapture Rebel Stronghold of Lysychansk After Fierce Fighting
West Bank Protests Grow as Israel, Hamas Fighting in Gaza Rages
Syria conflict: Isis ‘overruns’ Raqqa military base

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

Gold Gains From 5-Week Low as Prices Near Technical Level


25-Jul (Bloomberg) — Gold rose from a five-week low in New York, narrowing a second weekly loss, on speculation prices near a technical level will discourage selling.

Bullion fell as much as 1.3 percent to $1,289.40 an ounce yesterday, the lowest since June 19, as U.S. equities reached a record after data showed jobless claims fell and global manufacturing increased. The metal, which yesterday fell near its 200-day moving average, slid 28 percent last year on expectations the Federal Reserve would tighten monetary policy.

U.S. interest rates may rise sooner than forecast “if the labor market continues to improve more quickly than anticipated,” Fed Chair Janet Yellen said last week, adding the central bank must press on with stimulus because “significant slack” remains. Gold is heading for a monthly loss even amid unrest in Ukraine and the Middle East.

Gold’s decline to near the 200-day moving average “has so far been enough to halt the slide, as short-sellers have used that support to book some profit,” Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen, said today by e-mail. “Considering the improvement in recent data and speculation about the Fed’s intentions with regard to tightening, the market will be nervous over the coming week, leaving little room to the upside.”

[source]

Posted in Gold News, Gold Views |

US durable goods orders +0.7% in Jun, just above expectations of +0.6, vs negative revised -1.0% in May. Ex-trans +0.8%.

Posted in Economic Data |

Gold better at 1295.00 (+2.15). Silver 20.43 (+0.099). Dollar higher. Euro slides. Stocks called lower. US 10yr 2.51% (+1 bp).

Posted in all posts |

U.S. Says Russian Artillery Firing Across Border Into Ukraine

24-Jul (The Wall Street Journal) — The U.S. believes Russia is firing artillery across its border at Ukrainian military positions, the State Department said, an assertion that Moscow is playing a more direct role in the Ukrainian conflict.

The latest accusations show U.S. officials raising pressure on Moscow and more closely examining Russian activities near the rebel-held portions of eastern Ukraine since the downing of Malaysia Airlines flight 17, which Washington blames on pro-Russian separatist fighters.

State Department spokeswoman Marie Harf also said on Thursday that the U.S. has evidence Moscow intends to deliver powerful rocket systems to the pro-Russia fighters in Ukraine, but she declined to provide details about the systems or about how officials came to that conclusion.

“We have new evidence that the Russians intend to deliver heavier and more powerful multiple rocket launchers to the separatist forces in Ukraine and have evidence that Russia is firing artillery from within Russia to attack Ukrainian military positions,” Ms. Harf told reporters at a news briefing, calling the findings “some pieces of info I’ve been able to get from our intelligence friends.”

[source]

Posted in Geopolitical Risks |

QE: New York Fed purchases $2.369 billion in Treasury coupons.

Posted in Central Banks, Monetary Policy, QE |

New Zealand Raises Eyebrows With Dollar Talk

24-Jul (The Wall Street Journal) — The New Zealand central bank’s decision to raise interest rates Thursday was largely anticipated by the markets. Its stance on the soaring local currency, though, took them by surprise.

Describing the Kiwi dollar’s strength as “unjustified and unsustainable,” the Reserve Bank of New Zealand was widely seen as firing the first shot in a new war aimed at lowering the currency, the stubborn strength of which continues to hobble the nation’s exporters.

“We interpret this as a direct warning that the RBNZ may intervene in foreign-exchange markets by selling New Zealand dollars,” said Westpac Banking Corp.’s WBC.AU +0.12% New Zealand chief economist, Dominick Stephens. The New Zealand dollar shed close to one U.S. cent after the statement to trade as low as $0.8591.

The Kiwi has come off the 30-year peak it touched in early July, but is still trading at historically high levels. It is about 1.8% higher against a basket of currencies than in April 2013, when the central bank last intervened. At the time, the Kiwi moved slightly lower but the impact was short-lived.

[source]

Posted in Currency Wars |

IMF cuts back global growth forecast on limp US

24-Jul (Financial Times) — The International Monetary Fund has sliced its 2014 growth forecast from 3.7 to 3.4 per cent after a dismal first quarter in the United States and weakness in big emerging markets, reports Robin Harding.

Updating the forecasts in its World Economic Outlook, last released in April, the IMF said it expects growth to rebound during the rest of 2014 but warned that “downside risks remain a concern”.

The downgrade shows how 2014 is threatening to become yet another disappointing year for global growth, as deterioration in economies such as Brazil comes on top of the shock of a 2.9 per cent annualised fall in US output in the first quarter.

[source]

Posted in Economy |

The Daily Market Report: Gold Retreats Below $1300, But Downside Limited


24-Jul (USAGOLD) — Gold fell back below $1300 in overseas trading on Thursday. The yellow metal retreated on news of softer Chinese demand. Gains in equities and a firm dollar also weigh.

Chinese gold demand was off 19.4% in the first six-months of 2014, versus the same period last year, according the China Gold Association. However, Chinese demand was extremely robust last year as the price of gold fell for the first time in 13-years. This likely pulled future demand forward. I don’t know any serious analysts that believed last year’s pace was sustainable.

Strong PMI readings out of China and Europe added to the froth in global stock markets. However, U.S. flash PMI missed expectations, falling to 56.3 in July.

The IMF made their concerns about U.S. growth known yesterday with yet another cut to their 2014 growth forecast for America. IMF expectations for U.S. growth have ratcheted lower throughout the year; from +2.8% in April, to +2.0% in June, and now just +1.7%.

Weaker U.S. growth expectations led to weaker global growth expectations today. The IMF announced today that it had trimmed its 2014 global growth forecast from +3.7% to +3.4%.

Initial jobless claims plunged 19k to 284k for the week ended 19-Jul, well below expectations of 305k, vs upward revised 303k in previous week. That’s the lowest level seen since 2006. However, the BLS made note of seasonal volatility in claims this time of year. The market isn’t giving the print much credence.

U.S. new home sales plunged 8.1% to 406k in June, well below market expectations of 480k, reigniting concerns of a false-dawn in the housing market. May sales saw a sharp negative revision as well, from 504k to 442k.

If there’s anything in today’s U.S. data that might influence the Fed on rate hike timing, the housing data is probably it. I’m inclined to continue believing Yellen, that rates are going to remain low for some time to come.

The Reserve Bank of New Zealand, which is tightening, is simultaneously jawboning its currency lower. The RBNZ raised the official cash rate 25 bps to 3.5%. This was widely expected and the OCR is now up 100 bps since February. However, in an effort to prevent yield chasers from driving up the NZD, the RBNZ warned that the value of the kiwi is “unjustified and unsustainable” and prone to “significant fall.”

The currency wars continue, with the world’s financial powers adamantly opposed to currency appreciation. That, along with persistent and broad geopolitical risks, should limit the downside in gold.

Posted in all posts, Daily Market Report, Gold News, Gold Views |

US new home sales -8.1% to 406k in Jun, well below expectations of 480k, vs negative revised 442k (was 504k) in May.

Posted in Economic Data |

Gold below $1,300 as strong China, euro zone data lift stocks

24-Jul (Reuters) — Gold broke below the psychological level of $1,300 an ounce for the first time in a week on Thursday as robust economic data from China and the euro zone deterred investors from buying into safe haven assets like the metal.

Spot gold fell 0.4 percent to $1,299.04 an ounce by 1145 GMT, having earlier touched its worst in a week at $1,294.

U.S. gold slid $5.20 to $1,299.30, after stop-loss orders were placed below $1,300 by traders to limit losses, prompting further selling.

The dollar was down 0.1 percent against a basket of main currencies, mostly due to euro strength after data showed German business activity expanding in July, with the services sector growing at its fastest in three years, suggesting the European economy may be regaining momentum.

[source]

Posted in Gold News, Gold Views |

China gold demand slumps 19.4 pct on yr, but output rises

24-Jul (Reuters) – China’s gold demand slumped 19.4 percent in the first six months of 2014 from year ago, the China Gold Association said in a statement on Thursday, but production rose strongly in the same period as miners ramped up output to protect profit margins.

Gold demand from China, the world’s largest consumer, has slackened this year as a 28 percent tumble in 2013 prices, which was the first annual decline in 13 years, dented consumer confidence in the metal as an investment tool.

Lower demand this year is also partly due to huge purchases last year. The drop in prices prompted many to bring forward their purchases, eating into 2014 demand.

[source]

PG View: Demand was so strong last year on the price drop, that the current decline is not really a big deal. I don’t think anybody thought last years record demand would be sustained.

Posted in Gold News, Gold Views |

Jobless claims fall to lowest level since early 2006

24-Jul (Reuters) – The number of Americans filing new claims for unemployment benefits fell to the lowest level in nearly 8-1/2 years last week, suggesting the labor market recovery was gaining traction.

Initial claims for state unemployment benefits declined 19,000 to a seasonally adjusted 284,000 for the week ended July 19, the Labor Department said on Thursday.

That was the lowest level since February 2006, and confounded economists’ expectations for a rise to 308,000.

…Claims tend to be volatile around this time of the year when automakers shut down plants for retooling.

[source]

PG View: Markets don’t seem to be giving the data much credence after the BLS warned “claims are often very volatile this time of year.”

Posted in Economic Data |

US initial jobless claims -19k to 284k for the week ended 19-Jul, well below expectations of 305k, vs upward revised 303k in previous week.

Posted in Economic Data |

Gold lower at 1296.84 (-7.39). Silver 20.81 (-0.073). Dollar firm. Euro higher. Stocks called higher. US 10yr 2.49% (+3 bps).

Posted in all posts |

U.S. National Debt: $17,610,253,000,219.65

Posted in Debt |

IMF Cuts U.S. 2014 Growth Forecast to 1.7%

23-Jul (The Wall Street Journal) — The International Monetary Fund Wednesday revised its growth outlook for the U.S. economy for the second time in two months after a first-quarter contraction turned out to be worse than the fund originally forecast.

The IMF cut its growth expectations by 0.3 percentage point to 1.7%, updating its mid-June forecast that had already sliced nearly a percentage point from its prior outlook.

The latest prognosis is lower than the most pessimistic number issued by Federal Reserve officials in June at 1.9% and far below the central figures predicted by the central bank’s policy makers.

[source]

PG View: IMF expectations for U.S. growth in 2014 was 2.8% in April. They slashed that to 2.0% in June and have now further reduced expectations to 1.7%. It seems hopes for big offset to the disastrous Q1 contraction are fading. Must be the warmer weather we’ve encountered this summer.

Posted in Economy |

The Daily Market Report: Gold Consolidates Above $1300


23-Jul (USAGOLD) — Consolidative trading prevails in the gold market today, with the yellow metal confined to a narrow band just above the $1300 level. Geopolitical risks continue to support, while expectations of higher interest rates are seen as limiting the upside.

Russian president Putin, remains defiant in the face of harsher sanctions, sticking to his version of events that culminated with the downing of a Malaysian airliner. Russia and pro-Moscow separatists in Ukraine on the other hand, lay the blame at the feet of the Ukrainian military.

Ukraine reported that rebels had shot down two fighter aircraft today, near where flight MH17 crashed. One of those shoot-downs was confirmed by a rebel commander.

During an emergency Security Council meeting in Moscow, Putin vowed he would respond to NATO’s “expansion towards Russia’s borders.” It seems unlikely that the situation in Ukraine will deescalate any time soon.

“No matter what our Western counterparts tell us, we can see what’s going on. As it stands, NATO is blatantly building up its forces in Eastern Europe, including the Black Sea and the Baltic Sea areas. Its operational and combat training activities are gaining in scale.” — Vladimir Putin

While U.S. Secretary of State John Kerry claims there has been progress on another Gaza cease-fire, fighting between Hamas and the IDF rages on. The FAA has banned U.S. airline flights to Israel after a Hamas missile landed “within a mile” of Ben Gurion International Airport in Tel Aviv. The ban has been extended for a second 24-hour period, putting additional economic pressure on Israel.

ISIS continues to wreak havoc in both Iraq and Syria. The Sunni-extremists have implemented Sharia Law in Mosul, demanding that Christian convert, leave or die. They also burned an 1800 year-old Christian church.

The three Christian churches in Raqqa, Syria have been shuttered as well. However, the Christians have not been expelled. They are allowed to stay if they pay a tax.

BoE Governor Carney continues to send mixed messages regarding rate hikes. Carney warned today that rates need to rise, but they would be “gradual and limited.” This is the same Carney that railed on the BIS just last week for calling for rate hikes.

Expectations of a Fed rate hike continue to ebb and flow with the economic data. Recent data have been generally favorable, suggesting the first rate hike may come sooner than expected. However, even the optimists don’t see tightening until next year.

As long as the Fed’s favored measure of inflation (PCE) remains below target, a rate hike seems less-than imminent. A hike is even less likely as long as influential members of the FOMC perceive their to be slack in the labor market.

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

America’s lost oomph

19-Jul (The Economist) — BACK in the mid-1990s, America’s economic prospects suddenly brightened. Productivity soared. Immigrants and foreign capital flocked to take advantage of what was quickly dubbed the “New Economy”. The jobless rate fell to 4%, yet inflation remained low. All this led economists to conclude that America’s potential rate of growth—the speed at which the economy can expand while keeping unemployment steady and inflation stable—had risen sharply from its decades-long average of 3%, to 3.5% or even higher.

Sadly, the New Economy is no more. The recovery from the recession of 2008-09 has been the weakest of the post-war era, and evidence is mounting that America’s potential growth rate has plummeted. Its two big determinants, the supply of workers and the rise in their productivity, have both fallen short. Performance in the past year has been particularly feeble: America’s labour force has not grown at all and output per hour worked has fallen. The IMF recently cut its estimate of the country’s potential rate of growth to 2%. Other economists put it as low as 1.75%.

So far, the slide in potential has had little practical impact. Because the recession was so deep and the recovery so weak, the economy is still operating below its capacity. But in the long term a halving of the economic speed limit would have grim consequences. Living standards would rise more slowly, tax revenues would be lower and the burden of paying today’s debts heavier.

[source]

Posted in Economy |

The worst for gold may be over: Bank of America Merrill Lynch

21-Jul (MarketWatch) — On the heels of a 2.1% loss for gold last week and news that hedge funds have gone way short, gold bugs could perhaps use some cheer. Enter analysts at Bank of America Merrill Lynch who say the worst days for the precious metal may be over.

In a note to clients Monday, metals strategist Michael Widmer notes how gold prices GCQ4 +0.10% have stabilized this year thanks to steady physical demand from emerging markets — China and India absorbing mine and scrap supply — which has helped compensate for investor selling. In the future, he says, that balance will sway in gold’s favor:

“We believe that physical demand from emerging markets will gain further clout in the medium term as countries get more affluent, suggesting the worst may be behind the gold market.”

[source]

Posted in Gold News, Gold Views |

The Fed Still Has Little Reason to Worry About Inflation

23-Jul (WSJ GrandCentral) — Inflation chatter is heating up again among Wall Street economists. Wage pressures, some analysts argue, may be right around the corner as the unemployment rate falls and job growth picks up.

While a sluggish economic recovery has proven inflation hawks wrong time and again, that has not stopped some forecasters from predicting that price increases will accelerate someday because of the Federal Reserve’s unconventional policies of holding short-term interest rates near zero for years and buying bonds to lower long-term rates.

…Indeed, the Fed’s preferred measure of inflation—the Commerce Department’s personal consumption expenditures index–has been undershooting the central bank’s 2% target for two years. Any reading that finally approaches 2% – and even one that surpasses it slightly – is likely to be welcomed rather than feared by Fed Chairwoman Janet Yellen and many of her colleagues.

[source]

Posted in Central Banks, Monetary Policy |

Gold Steady-Firmer; Selling Interest Limited by Geopolitics

23-Jul (Kitco News, via Forbes) — Gold prices are steady to modestly higher in early U.S. trading Wednesday. Even though there is less risk aversion in the market place at mid-week, the geopolitical events recently are keeping sellers of gold pensive. August Comex gold was last up $2.40 at $1,308.80 an ounce. Spot gold was last quoted steady at $1,308.00. December Comex silver last traded up $0.039 at $21.105 an ounce.

The gold market has so far shown a muted reaction to reports just out that two Ukrainian military jets have been shot down by Russian rebels. Still, there is a bit more investor and trader risk appetite in the market place at mid-week. But the Russia-Ukraine crisis and the Israel-Hamas fighting remain on the front burner of the market place. Many veteran market watchers are surprised there has not been greater risk aversion in the market place amid the heightened geopolitical tensions the past week, or even the past few months. One explanation could be that the industrialized world is so awash in cash following the major central banks of the world pumping monies into the world financial system the past few years. In other words, there’s more money in the world to be thrown at many markets. That certainly appears to be the case in the major world stock indexes, which are hovering near record or multi-year highs. The above postulation also suggests serious price inflation should occur at some point down the road. However, at present there is more concern about deflation, especially in the European Union.

Gold, U.S. Treasuries and the U.S. dollar are safe-haven assets that have been and likely will continue to be supported from the heightened world tensions.

[source]

Posted in Gold News, Gold Views |

Ukraine says pro-Russia rebels shoot down two fighter jets

23-Jul (Reuters) — Pro-Russian rebels shot down two Ukrainian fighter jets on Wednesday, not far from where a Malaysian airliner was brought down last week in eastern Ukraine, killing all 298 passengers on board.

A spokesman for Ukraine’s military operations said the planes were downed near Savur Mogila, a burial mound in the Shaktersky region where a memorial marks ambushes by the Soviet army on occupying Nazis during World War Two.

He said he did not have any information about the pilots.

Igor Strelkov, who is now in charge of the rebel ranks in the eastern city of Donetsk, said the separatists had brought down one plane and that the pilot had ejected. He gave no further details.

Fierce fighting raged near the rebels’ two main centres in Donetsk and nearby Luhansk, where they have been pushed back by Ukrainian government forces, who have taken control of villages and suburbs around the cities.

[source]

Posted in Geopolitical Risks |

Gold better at 1309.44 (+1.63). Silver 20.99 (+0.03). Dollar firm. Euro soft. Stocks called higher. US 10yr 2.46% (unch).

Posted in all posts |

The Daily Market Report: Gold Supported by Geoplitical Risk, Even as Stocks, Dollar Gain


22-Jul (USAGOLD) — Gold has been mostly lower today, but trading conditions are choppy amid decent U.S. economic data, a firmer dollar and persistent geopolitical risks. The latter is keeping the yellow metal underpinned above $1300.

Inflation rose 0.3% in June, in line with expectations. The annual pace remained steady at 2.1%. Core CPI was up just 0.1%, below expectations. Existing home sales, home prices and the Richmond Fed index all beat expectations.

Stocks rebounded from recent downticks, with the S&P500 setting a new all-time high. The dollar index pushed to a new six-week high. And yet, the yellow metal continues to hold relatively firm on the geopolitical risks.

Some were heartened by the cooperation of pro-Russian separatists is Ukraine turning over the bodied of MH17 crash victims, as well as the black box. However, they and the Russians continue to point the finger at the Ukraine military for shooting down the plane.

Israeli forces continue to pound the Gaza strip, amid ongoing militant rocket attacks. The death toll continues to mount even as diplomats continue to try and broker a cease fire that Hamas might actually abide by. The IDF confirmed today that one of its soldiers is missing.

While events in Ukraine and Gaza have dominant the headlines lately, fighting in Iraq and Syria continues as well. ISIS seems to have shifted its focus back to Syria, capturing the Shaar gas field east of Homs city last week. More than 700 have been killed over the last several days.

Al Arabiya News reports that ISIS in now in control of 35% of Syrian territory, including “nearly all of Syria’s oil and gas fields.” The forces of Bashar al-Assad are going to have to respond aggressively or risk being choked off economically. Look for fighting in Syria to intensify.

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

Rising Wages Where? Real Wages Post First Annual Decline Since 2012

22-Jul (ZeroHedge) — For all the talk about “noisy inflation” this and “rising prices are good for the economy” that, what the Fed’s cheerleading squad continues to ignore is the one most important inflation the US economy needs in order to actually have a sustainable recovery instead of centrally-planned stagflation: wage inflation.

So while bullish pundits keep referring to some mythical CEO survey promising wage will increase any day now, just not today, the BLS released its most recent real wage (adjusted for inflation) report moments ago, showing that not only did the average real hourly wage remain flat for the second month in a row at $10.29, the lowest level since September 2013, but posted the first annual decline since October 2012.

[source]

Posted in Economy, inflation |

US existing home sales +2.6% to 5.04M pace in Jun, above expectations of 4.995M, vs 4.890M in May.

Posted in Economic Data |

US Richmond Fed index rose to 7.0 in Jul, above expectations of 5.0, vs positive revised 4.0 in Jun.

Posted in Economic Data |