Monthly Archives: October 2016

The Daily Market Report: Gold Consolidates After Second Consecutive Weekly Gain


31-Oct (USAGOLD) — Gold is narrowly confined after ending last week on a positive note; it was the second consecutive weekly gain. Action sto start the week has been relegated to the upper half of Friday’s range.

The Fed starts their 2-day FOMC meeting tomorrow. While it is widely anticipated that the Fed will not make a move on Wednesday, the market will hope for further clarification about the prospects for a December hike.

The market has pretty much bought into the notion that a policy tightening is warranted before year end, but data out today shows the Fed would pretty much have to ignore the absence of inflation to do so. The PCE chain price index rose 0.2% in September, in line with expectations. That leaves the annual rate of inflation at 1.2%, well shy of the Fed’s 2.0% target. This may prompt the Fed to keep their cards close the vest later this week.

Both Chicago PMI and the Dallas Fed index disappointed as well. Even with the support of market expectations and last week’s Q3 advance GDP beat, I think a December rate hike is still a long way from a sure-thing.

We also have the October jobs report coming out on Friday. Median expectations are for 174k payroll gains and for the unemployment rate to tick back down to 4.9%. The market as usual wil give the jobs data an inordinate amount of scrutiny.

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

Dallas Fed index rebounded to -1.5 in Oct, well below expectations of 2.0, vs -3.7 in Sep; 22nd consecutive month of contraction.

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Posted in Economic Data |

Gold dips as dollar bounces; focus on U.S. election, Fed


31-Oct (Reuters) — Gold dipped on Monday as the dollar rebounded after recent losses, though concerns over the outlook for the U.S. election and Federal Reserve policy kept the metal pinned near the previous session’s three-week high.

The metal hit its highest since Oct. 4 on Friday after the Federal Bureau of Investigation announced another investigation into Democratic presidential candidate Hillary Clinton’s use of a personal email server while she was secretary of state.

That shook up markets that had priced in a Clinton victory over Republican Donald Trump, prompting losses in stocks and the dollar.

…”People had been presuming the election was a done deal for Clinton,” said Natixis analyst Bernard Dahdah. “If this means her lead is reduced, the gold market could benefit from that uncertainty.”

October U.S. payrolls data on Friday will be of great interest this week, he said, while markets are looking for pointers on policy when the Fed meets on Tuesday and Wednesday.

“We’re not expecting a rate hike in November, but we’ll be looking at the language,” Dahdah said. “That could be a mover.”

[source]

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Posted in Gold News, Gold Views |

Chicago PMI tumbled to 50.6 in Oct, well below expectations of 53.8, vs 54.2 in Sep.

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Posted in Economic Data |

Morning Snapshot: Gold easier within Friday’s range

31-Oct (USAGOLD) — Gold is consolidating within Friday’s range. The yellow metal is slightly lower within that range with focus squarely on next week’s elections. This week’s FOMC meeting is a slight distraction, as they are unlikely to do anything ahead of said election, although they do have the market buy-in for a December rate hike that they’ve been seeking.

With regard to a rate hike, the Fed is still facing an inflation problem . . . or lack there of. The PCE chain price index — their favored measure of inflation — rose 0.2% in September, in line with expectations. That leaves the annual rate of inflation at 1.2%, well shy of the Fed’s 2.0% target.

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Posted in Gold News, Gold Views, Snapshot |

U.S. personal income +0.3% in Sep, below expectations of +0.4%, vs +0.2% in Aug; PCE +0.5%, in line, vs negative revised -0.1% in Aug (was unch).

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Posted in Economic Data |

Gold easier at 1273.25 (-2.40). Silver 17.84 (+0.051). Dollar higher. Euro lower. Stocks called better. U.S. 10-year 1.84% (-1 bp).

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Posted in Markets |

Gold jumps to nearly 4-week high on FBI Clinton probe


28-Oct (Reuters) — Gold rose 1 percent to the highest level in nearly four weeks on Friday, extending gains late in the session after the FBI said it will further investigate Democratic presidential candidate Hillary Clinton’s use of a private email system.

Just 11 days ahead of the U.S. presidential election, the news shook up the campaign, in which Clinton is the front-runner in opinion polls.

Spot gold was up 0.8 percent at $1,278.38 an ounce by 2:54 p.m. EDT (1854 GMT), after rising 1.3 percent to $1,284.14, the highest since Oct. 4. It is on track to close the week up 0.9 percent.

…”The FBI headlines startled a somnolent gold market, driving bullion a percent higher in a hour on concerns that a late October surprise could suddenly bolster (Donald) Trump’s sagging fortunes,” said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.

[source]

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Posted in Gold News, Gold Views |

Week in Review (Video) – October 28, 2016

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Posted in USAGOLD TV |

Gold now up more than $12 on the day

28-Oct (USAGOLD) — Recent intraday market volatility — including the gains in gold — are being attributed to news that the FBI is reopening the investigation of Hilary Clinton’s use of a private email server after discovering more emails “that appear to be pertinent.”

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Posted in Gold News, Gold Views, Markets |

Gold bolts higher on FBI announcement

Fox: FBI reopens investigation into Clinton e-mail use . . . . “stunning turn of events”

Bloomberg: FBI reopens Clinton e-mail probe less than 2 weeks before vote . .  . . “politically explosive development”

CNBC: Stocks slide after FBI says its probing new Clinton e-mails. . . . .

 

 

 

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Gold is setting new 3-week highs, despite better than expected advance Q3 GDP. Could be short covering on gold’s resilience.

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Posted in Gold News, Gold Views |

The Daily Market Report: Gold Resilient in the Face of Stronger Than Expected GDP Print


28-Oct (USAGOLD) — Gold remains consolidative, but resilient, in the face of this morning’s Q3 GDP beat and the corresponding rise in rate hike expectations. Markets in general seem nonplussed; there was a time not so long ago that a print like that would have sent the yellow metal at least $15-$20 lower. Perhaps a December rate hike is truly baked into the cake.

Advanced Q3 GDP came in at 2.9%, on expectations of +2.5%. This may in fact give the Fed the cover they need to pull the trigger in December. The FOMC will meet next week, and while we’ve been told that the November meeting is “live”, it is unlikely they will do anything in the week before the Presidential election. With the probability for a November hike at less than 10%, the Fed will not look to surprise and roil markets.

There are many articles this morning expressing optimism about the uptick in growth. Let’s remember though that we’ve seen even higher prints going back to the end of the Great Recession and each has proven to be unsustainable. In Q2-15, GDP came in at 2.6% and was followed by 2.0% in Q3 of that year. The Fed hiked in December and we saw sub-1% growth in both Q4-15 and Q1-16. Maybe cautious optimism should be the order of the day.


source: tradingeconomics.com

Behind the headline number, slower consumption is one reason for that caution. Personal consumption slowed to 1.47% in Q3, down from 2.88% in Q2. Real consumer spending rose 2.1%, below expectations of 2.6% and well below the 4.3% print in Q2. It was a rise in exports and inventory building that primarily contributed to today’s beat.

Again, I’m impressed with gold’s resilience in the face of better than expected economic data and the recent strength in the dollar. However, it’s worth noting that the dollar index is trading lower on the day and didn’t really see any intraday buying after the GDP number came out.

Maybe, just like last year, a rate hike is exactly what this market needs to trigger a breakout of the recent range. Last December, the Fed’s 25 bps hike marked the low of the move and gold rallied nearly 30% on the expectation that it would be a long time until we saw the next hike.

That proved to be true; as it looks like a full year will have passed between rate hikes. If this is the pace we can expect moving forward, it will be 2027 before rates are “normalized.” However, the odds of an 18-year uninterrupted recovery are slim to none.

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

Moody’s Warns Deutsche Bank Is Dangerously Close To Falling Below Its “Default Point”

28-Oct (ZeroHedge) — Moody’s Capital Markets Research issued a damning verdict on Deutsche Bank earlier this week. In a research report put together by the credit agency’s ‘Analytics’ research division, Moody’s analysts write that Deutsche Bank expected default frequency remains at one of the highest levels in the banking industry, despite the bank’s efforts to shore up its capital position.

[source]

PG View: We’ve been warning about the risks associated the Deutsche Bank for some time now. Those risks don’t seem to be diminishing . . .

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Odds of 2016 Fed rate rise near 75% after GDP data

28-Oct (FT) — Wall Street expectations for a 2016 rate increase climbed to nearly three-in-four, after data released on Friday showed US economic growth gained steam in the third quarter.

The implied odds of a rate increase this year rose to 74.2 per cent on Friday morning, from 72.5 per cent on Thursday, according to Bloomberg data on federal funds futures. That represents a marked increase from the roughly 60 per cent where they started the month.

The upward move comes after a closely watched report showing that the pace of US economic growth accelerated to the highest level in two years, raising confidence that the world’s biggest developed economy has regained its stamina after a tepid start to the year.

[source]

PG View: We’ve seen quarters of growth even higher than 2.9% going back to the end of the Great Recession, but that growth rate has always fizzled. Cautious optimism should be the order of the day.

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Posted in Economy |

University of Michigan sentiment (final) revised down to 87.2 in Oct, below expectations of 88.2, vs 87.9 preliminary and 91.2 in Sep.

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Posted in Economic Data |

Gold retraces all of post-GDP-beat losses to set new intraday highs. Now trading about $2 higher on the day, more than $10 off intraday low.

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Posted in Gold News, Gold Views |

Morning Snapshot: Gold slips on GDP beat

28-Oct (USAGOLD) — Gold came under renewed selling pressure within the range after advanced Q3 GDP came in at +2.9%, above expectations of +2.5%. That will further lift expectations for a December rate hike.

The FOMC meets next week, but they are unlikely to do anything in the week before the U.S. Presidential election. We’ll have to see if they’re inclined to kick the door wide open in their statement, or leave themselves an escape route in case the election or some other event adversely impacts markets.

At this point howeverm gold remains well within its recent range and the reaction in other markets has been pretty subdued thus far. The dollar index actually edged slightly lower. Recall that when the Fed hiked 25 bps last December, it launched gold on near-30% rally.

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Posted in Gold News, Gold Views, Snapshot |

U.S. Q3 ECI +0.6%, in line with expectations, vs +0.6% in Q2; +2.3% y/y, unchanged from Q2.

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Posted in Economic Data |

U.S. Q3 Advance GDP +2.9%, above expectations of +2.5%, vs +1.4% in Q2.

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Posted in Economic Data |

Gold easier at 1267.33 (-2.71). Silver 17.66 (+0.014). Dollar lower. Euro higher. Stocks called higher. U.S. 10-year 1.86% (+1 bp).

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Posted in Markets |

ECB’s ultra-loose policy may lose effectiveness over time: Mersch

27-Oct (Reuters) — The effectiveness of the European Central Bank’s ultra-loose monetary policy may decline over time while side effects could increase, a key policymaker argued on Thursday, as the bank contemplates whether to extend its asset-buying program.

“The longer the measures are in place, the less effective they may become,” ECB board member Yves Mersch said in a speech.

“The fact that additional lending in the euro area is losing momentum and that German banks are saying that the negative deposit facility rate is constraining lending volumes warrants attention,” Mersch said. “We must be vigilant that this development does not spread to other euro area countries.”

[source]

PG View: One only need look at Japan over the past 20+ years for proof positive that loose policy loses its effectiveness over time.

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Posted in Central Banks, Monetary Policy |

The Daily Market Report: Gold Steady Ahead of Tomorrow’s First Look at Q3 GDP


27-Oct (USAGOLD) — Gold remains well contained within the recent range, awaiting some impetus to breakout. Durable goods orders disappointed this morning, while initial jobless claims edged lower.

Despite the durable goods missed, the Atlanta Fed’s GDPNow model for Q3 edged higher to 2.1%, from 2.0% previously. The model anticipates a stronger net exports contribution on Q3. But again, look where the model started; above 3.5%! Even the blue chip consensus has been trending lower since early September.

We get the first official look at Q3 growth tomorrow morning. Median expectations remain at 2.5%, but I suspect there is a greater chance for a miss than a beat. If the advance GDP print is below 2.0%, we could see the long awaited breakout in the gold market as rate hike expectations get unwound.

If the Fed remains on hold, it could breath new life into the stagnant stock market. Even so, I think the Research Affiliates report that says investors should start getting used to disappointment will hold true.

“[T]he ubiquitous 60/40 U.S. portfolio has a 0% probability of achieving a 5% or greater annualized real return.” — Research Affiliates

An article in USAToday this morning reminds us that the last milestone in the stock market was DJIA 18,000, which was nearly 2-years ago! If the odds of a 5% return are zero, imagine how far off the mark many pension plans are when they’re still factoring in 7%+ returns.

This amounts to an increasingly dire situation for retirees and those nearing retirement age. And that dire situation extends to the broader economy as the massive surge of baby boomers reach retirement with less money than everyone expected. This will force them to live more prudently; to save more and spend less both before they retire and after, regardless of low yields. That does not bode well for an economy driven primarily by consumption.

It is widely acknowledged that including gold in one’s portfolio can improve overall performance:

“Gold can help investors manage portfolio risk. The key is the way that gold interacts with other assets. Two factors are particularly important: Low correlation with equities…gold has low correlations–lower than that of assets that are often seen as ‘diversifiers’–to stocks over long periods of time. Outperformance during crises. Gold tends to outperform other assets in periods of economic and financial turmoil. This gives investors a way to reduce risk when it is most needed.” — WGC

Now that we’re nearly a third of the way through the fourth quarter, this may be an opportune time to think about rebalancing your portfolio. Do you have any gold? If you have gold, do you have enough?

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

Gold Prices Boosted by U.S. Economic Data

27-Oct (WSJ) — Gold prices rose Thursday, boosted by weaker-than-expected U.S. economic data.

Gold for December delivery was recently up 0.4% at $1,271.90 a troy ounce in the Comex division of the New York Mercantile Exchange.

Demand for long-lasting manufactured products slipped slightly in September, durable goods data showed Thursday, in a sign that the U.S. factory sector is still on shaky ground.

Prices for the precious metal tend to get a boost on weaker U.S. economic numbers, as poor data bolsters the argument for the Federal Reserve to raise rates at a slower rate. Gold struggles to compete with yield-bearing investments such as Treasurys when borrowing costs rise.

[source]

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Posted in Gold News, Gold Views |

The Next 10 Years Will Be Ugly for Your 401(k)

GoldSilverBars
27-Oct (Bloomberg) — It doesn’t seem like much to ask for—a 5 percent return. But the odds of making even that on traditional investments in the next 10 years are slim, according to a new report from investment advisory firm Research Affiliates.

The company looked at the default settings of 11 retirement calculators, robo-advisers, and surveys of institutional investors. Their average annualized long-term expected return? 6.2 percent. After 1.6 percent was shaved off to allow for a decade of inflation1, the number dropped to 4.6 percent, which was rounded up. Voilà.

So on average we all expect a 5 percent; the report tells us we should start getting used to disappointment. To show how a mainstream stock and bond portfolio would do under Research Affiliates’ 10-year model, the report looks at the typical balanced portfolio of 60 percent stocks and 40 percent bonds. An example would be the $29.6 billion Vanguard Balanced Index Fund (VBINX). For the decade ended Sept. 30, VBINX had an average annual performance of 6.6 percent, and that’s before inflation. Over the next decade, according to the report, “the ubiquitous 60/40 U.S. portfolio has a 0% probability of achieving a 5% or greater annualized real return.”

[source]

PG View: This is not good news for retirees, or those approaching retirement. Some portfolio diversification is definitely in order.

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Posted in Markets |

Norges and Riksbank hold steady on rates, maintain dovish guidance. Riksbank statement suggests rates won’t start to rise until 2018.

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Posted in Central Banks, Monetary Policy, Negative interest rates |

The Dow’s 2-year trip to nowhere

27-Oct (USAToday) — The Dow has taken investors on a wild ride to nowhere in the past two years.

On Wednesday, the Dow Jones industrial average, the iconic U.S. stock index represented by 30 of the USA’s best-known companies, closed up 30 points at 18,199.13.

And while that gain pushed the Dow’s gain for the year up to 4.4%, it is a stark reminder that the stock market has barely budged in almost two years.

The last time the Dow passed a milestone, it was Dow 18,000. And that happened way back on Dec. 23, 2014 — nearly two years ago.

[source]

PG View: Without Fed accommodations and now the looming threat of another rate hike, the stock market has lost its buoyancy and is in fact looking increasingly vulnerable. If you’re looking to rebalance your portfolio, you should consider an allocation to gold.

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Posted in Markets |

Morning Snapshot: Gold firms within range on durable goods miss

27-Oct (USAGOLD) — Gold firmed on this morning’s durable goods miss. Core durable goods orders contracted on an annualized basis for a 21st consecutive month, the longest non recession contraction EVER. New orders — a recognized proxy for business spending — fell 1.2% in September, -3.6% y/y. But as the ZeroHedge blog quips, “apart from that, the economy is doing great.”

We will see an update to the Atlanta Fed’s GDPNow model later this morning, and it very well could be a sub-2% number. We’ll get the advance Q3 GDP report tomorrow, where expectations are still 2.5%. A disappointment on the growth front could completely reframe the December rate hike picture.

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Posted in Gold News, Gold Views, Snapshot |

U.S. initial jobless claims -3k to 258k for the week of 22-Oct, above expectations of 255k, vs revised 261k in previous week.

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Posted in Economic Data |

U.S. durable goods orders -0.1% in Sep, below expectations of +0.2%, vs positive revised +0.3% in Aug (was unch).

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Posted in Economic Data |