The Daily Market Report: Gold Consolidates, Underpinned by Weaker Dollar

06-May (USAGOLD) — Gold is consolidating below the $1200 level, underpinned by continued short-term weakness in the dollar. The dollar index fell to a new 11-week low today, following a weaker than expected ADP employment survey for April.

The soft ADP print offsets some of the upside risk for the April nonfarm payrolls report that comes out on Friday. That upside risk emerged last week with a much larger than expected drop in initial jobless claims for the week ended 25-Apr. Consensus on payrolls continues to erode, and presently stands at +220k.

Fed chair Yellen spoke today at the Institute for New Economic Thinking; and while she studiously avoided specif comment on monetary policy, she did say some pretty interesting things: Ms. Yellen categorized stock prices as being “quite high,” warning that, “There are potential dangers there.”

She went on to warn about liquidity risks in mutual funds that could develop amid a wave of redemptions. Those aren’t the kind of comments that will endear Yellen to Wall Street and secure her a lucrative post-Fed consulting gig like Ben “no-bubble” Bernanke!

Our own Johnathan Kosares wrote a great comment on Ms. Yellen’s observations, suggesting that the take-away might be to exit shares and buy gold (and silver). After all, while stocks are most certainly overvalued, both gold and silver are arguably quite undervalued.

Greece made another payment to the IMF today. That’s good news, but a much larger payment is due 12-May and a deal to released the final tranche of bailout funds remains elusive. Interestingly, the Greek Parliament just passed legislation that overturns some of the reforms made by the previous government. That’s certainly not going to improve Greece’s bargaining position and may in fact undermine the negotiations entirely.