The Daily Market Report: Gold Consolidates Above $1200 Amid More Economic Weakness

16-Apr (USAGOLD) — Gold is consolidating above $1200, underpinned by further evidence of U.S. economic weakness. A softer dollar is providing additional support.

Initial jobless claims jumped 12k last week to 294k, above expectations of 280k. Housing starts rebounded somewhat in March, but not nearly as much as expected in light of the dismal February figure. Housing Wire said the data reflect “deep weakness in March”.

With each and every data miss, Fed rate hike expectations get pushed further into the future. If things deteriorate to the point that a recession becomes likely, not only would a rate hike be off the table, but talk of QE4 would intensify.

Q1 GDP expectations have been dropping steadily of late. At their March meeting, FOMC members were expecting Q1 growth between 2.1-3.1%. Since then, consensus among private forecasters has dropped to about half what the FOMC thinks. The Atlanta Fed’s GDPNow indicator has been hovering just above 0%, it may just flip negative after the data that have come out this week.

As the dollar has trended higher over the last 4-years, gold rose in terms of euros and yen. However, if the Fed forestalls rate ‘lift-off’ again, the greenback is likely to rotate lower and gold will once again shine in terms of dollars.