29-Nov (USAGOLD) — Gold retreated into the range after the dollar rebounded toward nearly 14-year highs. However, last week’s low in the yellow metal at 1170.63 remains protected and some buying interest emerged during New York trading.
The greenback remains buoyed by weakness in other currencies, particularly the euro and yen. Additional support is being garnered amid heightened growth expectations in the wake of the recent U.S. election and a certainty that the Fed will move to raise interest rates next month.
U.S. data out today lent some additional credence to the notion that the recovery may be accelerating. Q3 GDP was revised to 3.2%, from the 2.9% advance number, versus 1.4% in Q2. Consumer sentiment surged to 107.1, its highest reading since 2007.
That exuberance may have translated into a good start to the all-important holiday shopping season. While all the data aren’t in yet, The National Federation of Retailers is suggesting that shopping on Black Friday and over the weekend was robust. “It was a strong weekend for retailers, but an even better weekend for consumers, who took advantage of some really incredible deals,” said NRF President and CEO Matthew Shay.
While the dollar strength creates a bit of a conundrum for the Fed, I don’t think they can walk back expectations at this point. That’s going to make the guidance proffered at the next FOMC meeting critically important. I don’t think they can indicate an accelerated pace of normalization without sending the greenback ballistic. Despite the improvement in the data, I think they will reiterate that slow and steady is still the order of the day.
It was that very same signal last year — though without the support of improving data — that launched gold on the rally that dominated much of this past year. Ongoing troubles overseas should continue to offer an underpinning to the yellow metal as well.
Keep in mind that the last time a Fed rate hike was in the offing, gold was trading around $1080. The last time the dollar index was at these levels, gold was below $350!