Monthly Archives: January 2017

EU chair labels Trump a ‘threat’ as Europeans debate U.S. ties

Reuters/David Randall/01=31-17

Donald Trump has joined Russia, China and radical Islam as a threat to the European Union, EU leaders were told on Tuesday by the man chairing a summit where they will debate relations with the United States.

…In vivid language that reflects deep concern in Europe at the new U.S. president’s support for Brexit, as well as his ban on refugees and people from several Muslim countries, Tusk called on Europeans to rally against eurosceptic nationalists at home and take “spectacular steps” to deepen the continent’s integration.

“…worrying declarations by the new American administration, all make our future highly unpredictable,” he said.

Posted in Europe, Geopolitical Risks |

Gold becomes one of investors’ favorite safe havens with Trump uncertainty

Reuters/David Randall/01-31-17

Some of Wall Street’s largest fund managers have taken a contrarian bet on gold, wagering that U.S. President Donald Trump’s governing style and upcoming elections in Europe will combine to create more stock market volatility and boost the prices of a metal long seen as a safe haven.

…Richard Bernstein, whose oversees $3.6 billion as head of Richard Bernstein Advisors, said he added to his exposure to gold and gold mining stocks before the presidential election in anticipation of higher inflation driven by rising wages.

“If you think inflation is going up, you want to hold real assets,” he said.

Posted in Gold News, Gold Views |

Greek bonds suffer ‘violent reaction’ as IMF bailout decision looms

FT/Mehreen Khan/01-31-17

Greece’s benchmark government bond yields have hit their highest level in two months amid concerns the International Monetary Fund is poised to exit its involvement in the country after more than six years of bailouts.

…Investors are dumping the bonds after a leaked IMF report laid bare the schism between the fund and the EU over Greece’s economic health after 2018.

…The Washington-based fund has a far more pessimistic outlook on the health of the Greek economy, warning of “explosive” debt dynamics if the EU does not provide a major debt restructuring for the country.

PG View: If the IMF pulls the plug, one has to wonder what the EU and the ECB will do . . . Will the term Grexit come to the fore once again?

Posted in Europe, European Debt Crisis |

Daily Market Report: Gold Surges Back Above $1200 as Dollar Index Matches 9-Week Low

USAGOLD/Peter A. Grant/01-31-17

Gold has moved within striking distance of the 10-week high of 1220.12 that was established last week. The yellow metal pushed convincingly back above $1200 after an advisor to President Trump said that Germany was taking advantage of the EU and the U.S. by taking advantage of a “grossly undervalued” euro.

I’m not even sure what that means. Germany does not have the option to use another currency. The euro is weak because of extremely accommodative ECB policy, and perhaps more importantly the tighter policy that our own Fed has implemented in recent years; dating back to the tapering of QE that began in 2013, all the way through the 25 bps rate hike this past December. Interest rate differentials are a primary driving force in FX flows.

So, is the dollar too strong, or is the euro too weak? And depending on your answer; who is responsible and what should be done to “correct” the situation? Suddenly gets a little more complicated, doesn’t it . . .

At any rate, the comments today scared the shorts in the euro. The euro rose accordingly, driving the dollar lower. The dollar index hit a 9-week low and key support level at 99.43. As gold is priced in dollars, a weaker greenback typically equates with a higher gold price.

The overarching theme here is the uncertainty that revolves around what many would argue is shoot-from-the-hip policy-making. This is likely to enhance the appeal of safe-haven assets such a s gold.

Offering additional support for gold was some soft economic data today. Chicago PMI fell to 50.3 in January, below expectations of 55.0, versus a negative revised 53.9 in December (was 54.6). Additionally, consumer confidence slumped to 111.8 in January, below expectations of 113.0, versus a negative revised 113.3 in December. I wondered just yesterday in the morning Snapshot when “consumer optimism will take a hit.”

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

Gold soars past $1,200 on Trump’s immigration ban, comments on Germany Jamasmie/01-31-17

Gold was back above $1,200 an ounce on Tuesday on increased safe haven demand as US President Donald Trump‘s immigration ban shook global markets and one his advisers suggested Germany was taking advantage of the European Union and the US by using a “grossly undervalued” euro.

Posted in Gold News, Gold Views |

U.S. consumer confidence fell to 111.8 in Jan, below expectations of 113.0, vs negative revised 113.3 in Dec.

Posted in Economic Data |

Chicago PMI fell to 50.3 in Jan, below expectations of 55.0, vs negative revised 53.9 in Dec (was 54.6).

Posted in Economic Data |

Gold adding to gains; now trading 1214.00, up nearly 1.5% on the day.

Posted in Gold News |

Euro Jumps on Trump Adviser Comments as Gold Gains

Bloomberg/Cecile Gutscher/01-31-17

The euro rose after a trade adviser to U.S. President Donald Trump said Germany is benefiting from a “grossly undervalued” currency while controversy around the White House’s immigration policy drove haven purchases of gold.

The euro rose after a trade adviser to U.S. President Donald Trump said Germany is benefiting from a “grossly undervalued” currency while controversy around the White House’s immigration policy drove haven purchases of gold.

Posted in Gold News, Gold Views |

Case Shiller 20-City Composite +0.2% in Nov; +5.3% y/y.

Posted in Economic Data |

Morning Snapshot: Gold jumps back above $1200

USAGOLD/Peter A. Grant/01-31-17

Gold jumped back above the $1200 level as stocks remain defensive and the dollar retreated. Trump advisor Peter Navarro said this morning that Germany is taking advantage of both the EU and U.S. with a “grossly undervalued” euro. That further elevated geopolitical and international trade concerns, driving the yellow metal to new highs for the week.

That comment came on the heels of slightly better than expected first look at European Q4 GDP at +0.5%. That leaves annualized 2016 GDP well below 1%. While Germany is doing better than Europe as a whole, if The Continent is garnering any benefit from an undervalued euro, it’s not really on the growth front. Inflation did jump to 1.8% in January, up from 1.1% in December.

The Fed’s two-day meeting begins today. No change in policy is expected, but markets will carefully parse the statement tomorrow in an effort to glean clues as to when (or perhaps if) the next rate hike will be forthcoming.

The BoJ held steady on policy today, as was widely expected. While they remain optimistic about inflation, Kuroda said its premature to start talking about QQE exit strategies.

Posted in Gold News, Gold Views, Snapshot |

U.S. Q4 ECI +0.5%, below expectations of +0.6%, vs 0.6% in Q3; +2.2% y/y.

Posted in Economic Data |

BoJ holds steady on policy in line with expectations. Kuroda says it’s still too early to discuss QQE exit strategies.

Posted in Central Banks, Monetary Policy, QE |

Gold higher at 1204.02 (+7.03). Silver 17.37 (+0.201). Dollar lower. Euro higher. Stocks called lower. U.S. 10-year 2.48% (-1 bp).

Posted in Markets |

Bond markets set for a taste of the 60s as inflation picks up

Reuters/Dhara Ranasinghe/01-30-17

Inflation has a habit of creeping up on you. Just ask historians.

From rates below zero less than a year ago, inflation across the developed world has risen in recent months toward central bank targets, largely driven by a rising oil price.

And if history is any guide, bond markets had better beware.

PG View: Given the recent history, the Fed is likely to behind the curve in dealing with rising inflation. That would likely result in real rates remaining negative for some time, which would bode well for gold. The yellow metal is of course the classic hedge against inflation, which has risen in value in the past, even in rising yield environments.

Posted in Markets |

Wall Street trips as Trump’s travel curbs fuel uncertainty

Reuters/Yashaswini Swamynathan/01-30-17

The S&P 500 and the Dow were set for their worst day in more than three months on Monday as investors worried over President Donald Trump’s orders to restrict travel to the United States.

…”The market is reacting negatively right now because of the uncertainty that it creates,” said Robert Pavlik, chief market strategist at Boston Private Wealth.

…the potential risk from Trump’s protectionist policies and the lack of clarity since he took office have dampened some of the enthusiasm.

The Dow, which soared 9.2 percent in the aftermath of Trump’s election, has gained only 1 percent after his Jan. 20 inauguration.

PG View: The VIX index has posted its biggest gain since November. Falling stocks and rising volatility is an environment generally favorable for gold.

Posted in Markets |

The Daily Market Report: Gold Buoyed by Falling Stocks, Defensive Dollar

USAGOLD/Peter A. Grant/01-30-17

Gold firmed in early U.S. trading and attempted to regain the $1200 level. While the 1200-handle has been illusive thus far, weaker stocks and a defensive dollar are seen as supportive to the yellow metal.

U.S. stocks are under heavy pressure today, led lower by banking and energy shares. This may just be profit taking in the wake of recent gains, or it could be ongoing uncertainty about the new policies coming out of Washington. If these losses are sustained, today could be the worst day in three-months for both the DJIA and S&P500.

In light of the disappointing Q4 GDP growth announced on Friday — and in particular the big subtraction from foreign trade — the overall health of the U.S. economy is suddenly somewhat suspect. It is likely that another year of sub-2% growth will ultimately be confirmed. So, growth remains anemic, even as inflation is showing signs of picking-up.

When the FOMC commences their two-day meeting tomorrow, this reality will surely be a big part of the conversation. While the Fed is not expected to make any policy changes at this meeting, it will be interesting to see if there are any changes to the statement that might suggest a more dovish bent.

As I suggested last week, it appears like the Fed hiked rates into Q4 weakness again, just as they did in December of 2015. Given that we only got one additional rate hike in 2016, investors are certainly re-calibrating expectations for multiple rate hikes this year. Additionally, the changeover in voting members leaves the FOMC slightly more dovish than that of 2016.

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

Gold attempting to regain $1200 as stocks drop and dollar gives back earlier gains.

Posted in Gold News |

Dallas Fed Index rose to 22.1 in Jan, above expectations of 16.0, vs positive revised 17.7 in Dec.

Posted in Economic Data |

Gold climbs ahead of busy week from Fed, economic data

MarketWatch/Rachel Koning Beals/01-30-17

Gold futures on Monday traded modestly higher as signs of growing inflation helped bolster prices. A packed week of economic data and a meeting of the Federal Reserve may also influence the trajectory of the yellow metal.

A closely watched reading on the labor market is due on Friday and a two-day meeting of the Fed is set to kick off Tuesday. Both key events, among others, could alter expectations for interest-rate increases, drive the dollar and assets pegged to it like gold.

Posted in Gold News, Gold Views |

Morning Snapshot

USAGOLD/Peter A. Grant/01-30-17

Gold is edging higher, buoyed by weaker stocks. However, a firmer dollar is limiting the upside.

U.S. yields are under some pressure in the wake of Friday’s Q4 GDP miss as investors re-calibrate the prospects for multiple rate hikes this year. The FOMC’s two-day meeting begins tomorrow. While they are expected to hold steady, analysts will pour over the statement when it comes out on Wednesday for any clues as to the Fed’s next move.

Personal income rose 0.3% in December, below expectations of +0.4%. PCE rose 0.5%. That pushed the savings rate down to 5.4%, the lowest since March of 2015. Americans have now been spending more than they took in for nine consecutive months. One has to wonder when the consumer optimism will take a hit.

Pending home sales and the Dallas Fed index are out later this morning.

Posted in Gold News, Gold Views, Snapshot |

U.S. personal income +0.3% in Dec, below expectations of +0.4%, vs0.1% in Nov; PCE +0.5%, in line with expectations.

Posted in Economic Data |

Gold better at 1192.26 (+1.23). Silver 17.14 (+0.001). Dollar higher. Euro lower. Stocks called lower. U.S. 10-year 2.49% (unch).

Posted in Markets |

Coincidence? Dow Hits 20,000 As National Debt Reaches $20 Trillion

ZeroHedge/Michael Snyder/01-27-17

The Dow Jones Industrial Average provides us with some pretty strong evidence that our “stock market boom” has been fueled by debt. On Wednesday, the Dow crossed the 20,000 mark for the first time ever, and this comes at a time when the U.S. national debt is right on the verge of hitting 20 trillion dollars.

Is this just a coincidence? As you will see, there has been a very close correlation between the national debt and the Dow Jones Industrial Average for a very long time.

Posted in Debt, Economy, Markets |

The Daily Market Report: Gold Underpinned as U.S. Economic Data Disappoint

USAGOLD/Peter A. Grant/01-27-17

Gold rebounded from earlier losses and is presently trading near unchanged on the day. Disappointing economic data this morning seems to have put the recent stock market rally on hold for the time being and raised some doubts about the likelihood of multiple Fed rate hikes this year.

Advance Q4-16 GDP came in below expectations at 1.9%. That’s nearly a 50% drop from the 3.5% growth pace seen in Q3. That suggests that the Fed did indeed hike into weakness this past December, just as they did in December of 2015.


After the 2015 rate hike, it was revealed that growth had slowed from 2.0% in Q3 to 0.9% in Q4 and so it ended up being a full year until the Fed pulled the trigger again. While 1.9% is certainly not as bad as 0.9% the percentage drop is similar. Will it be another year until the next rate hike? Those that bought into the dot-plot inspired notion that there would be three rate hikes this year are likely re-calibrating.

Significantly, net trade was a major drag on the economy late in the year, subtracting 1.7 points. This is likely attributable to the dollar reaching 14-year highs into year-end.

Additionally, durable goods orders fell 0.4% in December, well below expectations of +3.0%. November was negatively revised to -4.8%.

A pretty bad set of numbers to be sure. However, University of Michigan consumer sentiment for January was revised higher to 98.5, from the preliminary print of 98.1 and 98.2 in December. Consumers remain optimistic, which tempered the negative reaction to the earlier numbers somewhat.

The Fed meets next week. They are widely expected to hold steady, but we’ll see if the statement takes a more dovish turn in light of today’s data.

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

Gold Weaker, But Downbeat U.S. Data Limits Selling Pressure

Kitco News, via Forbes/01-27-17

Gold prices are modestly lower and hit a three-week low in early U.S. trading Friday. However, prices rebounded a bit from the overnight low following some weaker-than-expected reports on the U.S. economy. February Comex gold was last down $8.50 an ounce at $1,181.40. March Comex silver was last down $0.16 at $16.69 an ounce.

The U.S. data falls into the camp of the U.S. monetary policy doves, who do not want to see U.S. interest rates rise any further anytime soon.

PG View: Tempered rate hike expectations should offer some support to the gold market.

Posted in Gold News, Gold Views |

While gold is languishing near unchanged on the day after this morning’s data misses, silver is up more than 30¢ (nearly 2%).

Posted in Gold News, Silver News |

Post series: The myth of the strong dollar policy, Part Two

Myth: The strong dollar policy means that the U.S government will do everything in its power to make the U.S. currency as good as gold.

Reality (as defined at Wikipedia):  “The strong dollar policy is the United States economic policy based on the assumption that a strong exchange rate of the United States dollar is in the interests of the United States and the whole world. It is said to be also driven by a desire to encourage foreign bondholders to buy more Treasury securities. The United States Secretary of the Treasury occasionally states that the US supports a strong dollar. Since the implementation of this policy, the dollar has declined substantially. Despite this, the policy keeps inflation low, encourages foreign investment, and maintains the currency’s role in the global financial system.”

Whenever a U.S. secretary of Treasury utters the words “strong dollar policy,” the question immediately should be asked: “Strong against what?” As outlined in the Wikipedia definition immediately above, the intent of the policy is to make the dollar strong in terms of other currencies, not against goods and services, and for that reason, it is generally misunderstood.

In terms of purchasing power, the dollar is by far worse off today than it was 21 years ago when Robert Rubin first uttered those words as Treasury Secretary (and taken thereafter as self-explanatory). For certain, there have been periods when the dollar has strengthened against a broad basket of currencies, but to apply former senator Alan Simpson’s famous description of the U.S. economy to the dollar: “It is the healthiest horse in the glue factory.”

To illustrate the point I have three charts for you.

The first tells the long-term story on the U.S. dollar since 1913 and passage of the Federal Reserve Act which established the Federal Reserve System as the central bank of the United States and Federal Reserve notes, i.e., the dollar, as the national currency. The results in terms of the dollar’s purchasing power are worth noting. Since 1913, the U.S. dollar has lost 96% of its purchasing power when measured against the Consumer Price Index.

The second tells the long-term story on the U.S. dollar since 1971, the year the United States went off the gold standard, freed the dollar to float against other national currencies and ushered in the fiat dollar international monetary system. Since 1971, the U.S. dollar has lost 83.6% of its purchasing power when measured against the Consumer Price Index. Simultaneously, gold has appreciated 3428%. (at $1200/oz)

The third tells the story on the U.S. dollar since 1995, the year then Treasury Secretary Robert Rubin first used the phrase “strong dollar policy.” Since 1995, the U.S. dollar has lost almost 40% of its purchasing power when measured against the Consumer Price Index – a period by most accounts of generally benign inflation.  Simultaneously, gold has appreciated 317%. (at $1200/oz)

Posted in all posts, Author, MK |

Morning Snapshot: Weak U.S. data should help underpin gold

USAGOLD/Peter A. Grant/01-27-17

Gold is recovering from earlier losses after some rather disappointing economic data this morning. The first look at Q4 GDP came in at 1.9%. Expectations were for +2.1%. Durable goods orders in December fell 0.4%, on expectations of a 3.0% rise.

Barring upward revision, the U.S. economy grew at a sub-2% pace last year. The optimism surrounding the 3.5% growth in Q3 has been dashed and it looks like the Fed hiked into Q4 weakness again, just as they did in Q4-15.

U.S. yields are under pressure as the markets recalculate the prospects for multiple rate hikes this year. The fact that trade subtracted 1.7% from growth in the last quarter of the year reinforces the notion that the strong dollar is hurting U.S. exporters.

If the greenback resumes its recent downtrend, it will provide an underpinning for the gold market. Diminished rate hike prospects will offer support as well.

Posted in Gold News, Gold Views, Snapshot |

U.S. durable good orders -0.4% in Dec, well below expectations of +3.0%, vs negative revised -4.8% in Nov.

Posted in Economic Data |