Monthly Archives: April 2017

News & Views – Forecasts, Commentary & Analysis on the Economy and Precious Metals

May, 2017 Edition – Weekend Sneak Peak

If you are looking for some engaging weekend reading, you might want to try the May edition of our newsletter.  We think you will find this month’s lead article revealing.  It explores gold’s historic undervaluation at current prices. (You might be surprised at just how undervalued it is in an  historical context.) We cover a lot of ground in our GoldNotes section.  Your interest is welcome. . . . . . Seems to be good reason to feature this  Ed Stein cartoon in our May issue ––

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Larry Fink: Expect ‘Severe Issue’ in U.S. Economy If Trump’s Tax Plan Adds to Deficit

WSJ/Sarah Krouse/04-28-17

BlackRock Inc. Chief Executive Laurence Fink cast doubt on the viability of the Trump administration’s tax plan, saying that if the proposal adds to the country’s deficit, it will create a “severe issue.”

Mr. Fink, who runs the world’s largest asset manager, also called the possibility of sustainable 3% growth unlikely. Part of the challenge the U.S. faces, Mr. Fink said, is demographics. Baby boomers, the largest living generation in the country is aging, reaching retirement age.

“With our demographics it seems pretty improbable to see sustainable 3% growth,” Mr. Fink said at an investing conference hosted by research firm Morningstar Inc. in Chicago.

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Posted in Economy, Politics |

The Daily Market Report: Gold Firms After First Look At Q1 GDP Disappoints


USAGOLD/Peter Grant/04-28-17

Gold edged higher in the wake of this morning’s advance Q1 GDP disappointment. Silver on the other hand remains on the defense, dropping to a 6-week low of 17.14. That drove the gold/silver ratio to a 10-month high above 73.44.

The BEA reported Q1 GDP at 0.7%, well below expectations of 1.3%. That puts the advance number smack-dab in the middle, between the median expectations and the Atlanta Fed’s GDPNow forecast that was lowered to +0.2% yesterday.

That 0.7% print is the lowest since Q1-14. In this instance, the bad number is largely attributable to a collapsed in consumer spending, which rose just 0.23% in Q1. That’s the smallest increase in spending since 2009. I said it several weeks ago when the March retail sales print was -0.2%:

The FOMC will meet next week, and they are widely expected to hold steady on policy. Focus is really on the June meeting, where the weak GDP data have not had a significant impact on rate hike expectations…yet. Odds of another 25 bps rate hike are holding steady around 67%.

However, in light of 3.5% in Q3-16, 2.1% in Q4-16 and now 0.7% in Q1-17, it sure looks like the Fed is hiking into weakness; just like they did in December of 2015, prompting a year-long pause in the tightening cycle. Additionally, with oil back below $50, price risks have mitigated significantly as well. Does the Fed really have a reason to hike in June?

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

No government shutdown for now: Senate passes short-term funding bill

AP, via CNBC/04-28-17

With just hours to spare, Congress easily approved a short-term spending bill Friday that would prevent a partial federal shutdown over the weekend. But on President Donald Trump’s 99th day in office, lawmakers were leaving until next week without completing two other measures he’s coveted: A Republican health care overhaul and a budget financing government for the entire year.

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Posted in Politics |

U.S. first-quarter growth weakest in three years as consumer spending falters

Reuters/Lucia Mutikani/04-28-17

The U.S. economy grew at its weakest pace in three years in the first quarter as consumer spending barely increased and businesses invested less on inventories, in a potential setback to President Donald Trump’s promise to boost growth.

Gross domestic product increased at a 0.7 percent annual rate also as the government cut back on defense spending, the Commerce Department said on Friday. That was the weakest performance since the first quarter of 2014.

PG View: That falls right between the Atlanta Fed’s GDPNow forecast and expectations. Still, it makes the March rate hike look pretty ill-advised.

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Posted in Economy |

Gold firms as dollar, stocks retreat, but still eyes weekly loss


Reuters/Jan Harvey/04-28-17

Gold rose on Friday as forecast-beating euro zone inflation boosted the euro against the dollar, while global stock markets retreated from Wednesday’s record highs as concerns about global trade subdued appetite for cyclical assets.

…”Most of the correction should be done by now,” Commerzbank analyst Daniel Briesemann said. “We see good support at this level. There are a lot of uncertainties remaining.”

“The high-risk appetite at the beginning of the week seems to have abated, at least for now. This has definitely helped support the gold price, and the dollar is supportive as well.”

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Posted in Gold News, Gold Views |

U.S. Q1 ECI +0.8%, above expectations of +0.6%, vs +0.5% in Q4; +2.4% y/y.

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Posted in Economic Data |

U.S. Q1 advance GDP +0.7%, below expectations of +1.3%, vs +2.1% in Q4.

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Posted in Economic Data |

The Daily Market Report: Gold Consolidates Within Yesterday’s Range, Silver Falls Further


USAGOLD/Peter Grant/04-27-17

Gold is consolidating within yesterday’s range amid conflicting fundamentals. Silver on the other hand remains defensive, slipping to a 6-week low and driving the gold/silver ratio to a 5-month high near 73.

Heightened risk appetite in the wake of the French election and the roll-out of the Trump administration’s tax plan is being tempered somewhat by geopolitical tensions, as well as concerns surrounding the specifics of the tax proposal.

Senators received “a long and detailed briefing” on the North Korean situation yesterday. “The military is obviously planning for a number of options, as they should — minimal military action to more significant action,” said Senator Ted Cruz of Texas. North Korea was confirmed as the Trump administration’s top foreign-policy priority.

Critics of the President’s tax plan complain that it is woefully short on specifics. “It’s the beginning of a negotiation but the numbers don’t add up, it’s never going to get through Congress in its current form, it’s completely devoid of detail,’ said Jim Rickerts in a SkyNews interview. Maya MacGuineas, president of the Committee for a Responsible Federal Budget, told the New York Times, “[T]here is no golden goose at the top of the tax-cut beanstalk, just mountains of debt.”

Ms. MacGuineas’s group estimates that Mr. Trump’s plan could reduce federal tax revenue by $3 trillion to $7 trillion over a decade. — NYT

The President’s team contends that the tax cuts will stimulate stronger growth, and hence generate more not less tax revenue. But this isn’t the 1980s, and that idea faces a pretty strong headwind from the demographic realities.

The Atlanta Fed slashed their estimate for Q1 GDP yet again, to a scant 0.2%. Goldmann Sachs is now expecting 1.1% growth in Q1, down from its previous estimate of +1.4%.

We’ll see the Q1 Advance Report from the BEA tomorrow morning. If the GDPNow model is closer to the reality than the current median expectations of +1.3%, the March (and December) rate hike(s) are going to look pretty foolish.

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

U.S. NAR pending home sales index -0.8% to 111.4 in Mar, above expectations of 111.2. vs 112.3 in Feb.

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Posted in Economic Data |

China’s gold consumption up in Q1

Xinhua/An/04-27-17

China’s actual gold consumption rose 14.73 percent to 304.14 tonnes in the first quarter of 2017 due to steady gold ornament sales and strong sales of gold bars, new data showed Thursday.

Thanks to strong demand around Chinese New Year, gold ornament sales rose 1.4 percent to 170.93 tonnes and gold bar sales surged 60.18 percent to 101.19 tonnes, the China Gold Association said.

The surge in gold bar sales came on the back of more people using them to hedge against risk as the public became more aware of its attributes, according to analysts.

Gold output in the first three months stood at 101.2 tonnes, down 9.29 percent from a year earlier, the association said.

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Posted in Gold News, Gold Views |

Gold tries to snap three-day slide with narrow advance


MarketWatch/Rachel Koning Beals/04-27-17

Gold managed a slim gain early Thursday, on track to snap a three-day slide and pulling futures up from a 2 ½-week low.

…A report showing a climb to one-month highs for weekly jobless benefit claims proved mildly supportive for gold, should a slowdown in the labor market prompt a pause in expected Federal Reserve rate hikes. But the metals market reaction to the data was muted at best.

…“No new drum beat or drama in today’s ECB announcement. The French election has them on a tight leash. We expect the ECB will have zombie-like moves even after the French elections. They cannot afford to jeopardize their hard labor,” said Naeem Aslam, analyst with Think Markets. The uncertainty could keep a floor under haven gold.

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Posted in Gold News, Gold Views |

ECB keeps quantitative easing in place before decisive French vote

FT/Claire Jones/04-27-17

The eurozone’s policymakers have kept their aggressive monetary easing in place ahead of the decisive round of the French presidential election but Mario Draghi hailed improving economic growth.

The European Central Bank’s governing council left its benchmark main refinancing rate at zero and the deposit rate at minus 0.4 per cent. The region’s central bankers will continue to buy €60bn in mostly government bonds under a quantitative easing programme that will run until at least the end of this year.

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Posted in Central Banks, Monetary Policy, QE |

Morning Snapshot: Gold remains consolidative

USAGOLD/Peter Grant/04-27-17

Gold continues to consolidate around the 1265.00 level, weighed by the present risk-on environment, but buoyed by a softer dollar, geopolitical risks and some uncertainty about how much of the Trump agenda might actually get implemented. With the French political risks likely unwound, the yellow metal might be staging for a rebound.

The ECB held steady on both interest rates and the QE schedule today, as was widely expected. However, the door remains open for further accommodation: “[I]f the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration.”

There has been speculation this week that a more hawkish tone might be communicated in June, once France has a new President. “We don’t do monetary policy on the likely outcome of elections,” claimed Draghi.

Initial jobless claims rose 14k last week to 257k, above expectations of 241k. Durable goods orders disappointed, rising 0.7% in March, on expectations of +1.2%. The advance trade deficit held steady at -$64.8 bln in Mar, near expectations of -$65 bln.

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Posted in Gold News, Gold Views, Snapshot |

ECB steady on rates and QE schedule, in line with expectations.

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Posted in Central Banks, Monetary Policy, QE |

U.S. durable goods orders +0.7% in Mar, below expectations of +1.2%, vs positive revised +2.3% in Feb.

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Posted in Economic Data |

U.S. advance trade deficit steady at -$64.8 bln in Mar, near expectations of -$65 bln, vs -$64.8 bln Feb.

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Posted in Economic Data |

U.S. initial jobless claims +14k to 257k in the week ended 22-Apr, above expectations of 241k.

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Posted in Economic Data |

Gold lower at 1263.82 (-3.81). Silver 17.43 (-0.051). Dollar higher. Euro lower. Stocks called higher. U.S. 10-year 2.31% (+1 bp).

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Posted in Markets |

Flash Special: Silver Polar Bear (2013)

Sales of our Canadian Silver Polar Bear 1.5 ounce coins have been brisk, with well over 4000 units sold in just under two days of availability, leaving about 1500 units still available for sale. Silver prices have come down nicely as well, making these an even more attractive entry point than when initially offered.

At just $2.75/oz over the spot price of silver per ounce, these limited run (only 17500 struck), first year of issue (2013) Polar Bears are LESS per troy silver ounce than either a modern Silver Eagle or Silver Maple Leaf. Moreover, at roughly $30.50 per coin, they are a full $4 per coin cheaper than our nearest competitor. At such a great price, it’s no wonder these have been so popular.

Please visit our special offers page link for more details.

• All coins dated 2013, which is the first year these were produced. Only 17,500 total coins were minted in 2013, which means the grouping offered here is roughly 1/3 of all the coins made during that inaugural run.

• Other dealers are charging $35-$36 per coin at best (and in some cases substantially more), making this offer the absolute lowest price for this product in the market right now by a wide margin.

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Posted in all posts, USAGOLD |

Gold and NAFTA. . . .A consideration

Quick Update/Michael J. Kosares

Now let’s take a look at gold from the same perspective:

In 2015, the United States imported 265 tonnes of gold for consumption.  Of that, 41% (109 tonnes) came from Mexico and 19% (50 tonnes) from Canada, or 60% of the total consumption.  The United States is in somewhat better shape on gold than silver in terms of domestic availability, i.e., it exports 500 tonnes per year, a somewhat nebulous figure in that it includes outflows from foreign stocks at the New York Federal Reserve. The U.S. produces 200 tonnes per year from domestic mines and holds 8100 tonnes at the Treasury Department.  Nevertheless, Mexico and Canada’s imprint on U.S. gold fundamentals is noteworthy.

U.S. Geological Survey gold statistical overview

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Posted in all posts, Author, MK |

Silver and NAFTA. . . .A consideration

Quick Update/Michael J. Kosares

With reports circulating in the media that the Trump administration is preparing an executive order to withdraw the United States from NAFTA, I thought it might be interesting to review how much of the silver consumed in the U.S. annually comes from Mexico and Canada.  In a nutshell, according to the U.S. Geological Survey, of the 8100 tonnes consumed by the United States during 2015, 6700 tonnes were imported.  Of that, 54% came from Mexico and 26% from Canada.  In tonnes that translates to 3600 tonnes from Mexico and 2100 tonnes from Canada, or over 70% of the silver consumed (5700 tonnes).  The U.S. Treasury strategic stockpile is less than 500 tonnes.

U.S. Geological Survey silver statistical overview

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Posted in all posts, Author, MK |

Trump Calls for Deep Cuts in Business Taxes, Changes for Individuals

WSJ/Richard Rubin & Nick Timiraos

President Donald Trump called for deep reductions in business tax rates and major changes to the individual tax system in a bid to reinvigorate his economic and legislative agenda as he nears the 100-day mark of his presidency.

…Mr. Trump is also proposing a 35% top tax rate for individuals, down from today’s 39.6% rate but above the 33% rate he backed during the campaign. Lower brackets would be set at 10% and 25%, and the standard deduction for individuals would be doubled.

The corporate tax rate would drop to 15% from 35%, and U.S. companies would owe little or no tax on their future foreign profits. The tax rate on business income reported on individual returns would also drop to 15% instead of being taxed at individual tax rates.

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Posted in Politics |

The Daily Market Report: Gold Consolidates Ahead of Tax Plan Reveal, Meeting on North Korea


USAGOLD/Peter Grant/04-26-17

Gold has stabilized after falling in the wake of the French election outcome. Additional weight was supplied by the U.S. tax reform proposal, which includes a 15% corporate tax rate. Stocks love the idea, which put safe-haven assets on the defensive.

The White House is touting the tax plan as the “biggest tax cut and largest tax reform” in U.S. history. Whether President Trump can get such an ambitious plan through Congress remains to be seen. Republican deficit hawks are already raising questions.

If you subscribe to the formula that each basis point of tax cuts equates to $120 bln in lost tax revenue, we’re looking at a $2.4 trillion in revenue that will need to be found elsewhere. The Trump administration claims it will be offset by growth, the concern is that those moneys will have to be borrowed.

As a real estate developer — comfortable with leverage — the President may not be too worried about adding to our $20 trillion debt, but we as a country have already borrowed far too much prosperity from our future. Will he get the amplified growth he desires, or will corporations just use their new-found tax savings to finance the further consolidation of their industries?

The full U.S. Senate will troop to the White House later today to be briefed by Trump administration national security officials on the situation in North Korea. Focus is likely to be on the threat posed by the DPRK’s advancement in nuclear weapons and delivery vehicles.

North Korea’s arsenal may well hit 50 weapons by the end of Mr. Trump’s term, about half the size of Pakistan’s. American officials say the North already knows how to shrink those weapons so they can fit atop one of its short- to medium-range missiles — putting South Korea and Japan, and the thousands of American troops deployed in those two nations, within range. — New York Times

Whether these concerns rise to the level of warranting a preemptive strike remains to be seen. Perhaps the President is looking to get a feel from the Senate as to whether they have the stomach for such a thing. One smart person suggested yesterday that if the U.S. evacuates military dependents from South Korea, things are really getting serious.

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

Gold’s tempered climb makes gains more ‘sustainable’, says Milling-Stanley


MarketWatch/Myra P. Saefong/04-26-17

Gold is positive on the year, but maybe not as much as some investors expected given the abundance of economic and political uncertainty that usually feeds a rally in prices for the metal.

…Gold’s more tempered price rise, however, is actually encouraging, and points to a more sustainable rally for gold, according to George Milling-Stanley, head of gold investment strategy at State Street Global Advisors.

…“By the end of the year or early next year, I believe gold could test the high end of the range of $1,350 to $1,400,” he told MarketWatch.

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Posted in Gold News, Gold Views |

Here’s how much a Trump tax-plan letdown could whack the stock market

MarketWatch/Barbara Kollmeyer/04-26-17

Expect investors to zero in on what the White House has to say about corporate taxes — widely expected to be cut to 15%, as will the top income-tax rate. There’s wariness about just how much POTUS can achieve, given the pushback over health care, and there are worries about a potential government shutdown wreaking havoc in the near term.

…There’s no doubt in Michael O’Rourke’s mind which way the dice will fall. The JonesTrading strategist is convinced the tax announcement will be an “unrealistic, massive disappointment.”

“It will be hard (likely impossible) for the president to get his own party to approve massive unfinanced corporate tax cuts, let alone the Democrats,” he tells clients. “Many politicians in Washington want to see the president fail. The more he promises and raises expectations, the more likely it is that he will.”

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Posted in Markets, Politics |

Morning Snapshot: Gold consolidates recent losses

USAGOLD/Peter Grant/04-26-17

Gold is consolidating at the low end of this week’s range as French election relief and the proposed U.S. corporate tax cut continues to foster a risk-on environment. Geopolitical risks and a weaker dollar are seen as limiting the downside.

Treasury Secretary Mnuchin, speaking in CNBC this morning, confirmed that the Trump administration would seek a 15% corporate tax rate. Mnuchin claimed the plan would be “the biggest tax cut and the largest tax reform in the history of our country.”

Now we just need to see the details, realizing that a tax cut of this magnitude is also going to take a serious bite out of revenue. Each percentage-point cut is said to equate with $120 bln in tax revenue. You start talking about a 20 bps tax cut and you’re talking about real money.

Today’s U.S. economic calendar is quiet with EIA data and 2-year and 5-year Treasury auctions. Tomorrow the ECB will announce policy.

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Posted in Gold News, Gold Views, Snapshot |

Gold steady at 1263.50 (-0.38). Silver 17.57 (-0.089). Dollar higher. Euro lower. Stocks called mixed. U.S. 10-year 2.34% (+1 bp).

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Posted in Markets |

Daily Market Report: Gold Remains Defensive as Risk Appetite is Stoked


USAGOLD/Peter Grant/04-25-17

Gold extended modestly lower, exceeding yesterday’s low at 1265.12 as risk assets continue to benefit from the French election results and the prospect of much lower U.S. corporate taxes. The weaker dollar and geopolitical risks continue to offer some support.

“Between the France election and the prospects of corporate tax cuts being proposed in the next few days, it’s clearly a risk-on backdrop.” — Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie Group Ltd

The Trump administration’s pitch for a 15% corporate tax rate has stock market investors all excited, but it strikes me as unlikely such a low rate will actually get through Congress. This could be typical Trump negotiating tactics; ask for the moon and negotiate to some compromise.

Nonetheless, stocks are charging higher and the dollar index has fallen to levels not seen since November. According to Reuters, ECB sources are suggesting there could be a hawkish signal in June.

Three sources on and close to the European Central Bank’s Governing Council told Reuters that with the threat of a run-off between two eurosceptic candidates in France averted, and with the economy on its best run in years, many rate setters see scope for sending a small signal in June towards reducing monetary stimulus. — Reuters

The next ECB policy announcement is Thursday, but they are widely expected to hold steady. Even so, there could be some sense of relief communicated that might be a harbinger of a more hawkish tone in June.

In Japan however, BoJ Governor Kuroda sees QE continuing for some time. Kuroda said a stronger yen could delay attainment of their 2% inflation goal, so of course that’s the last thing the BoJ wants.

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

U.S. FHFA home prices index +0.8% to 244.8 in Feb. Case Shiller 20-citites index (nsa) +0.4% to 193.5 in Feb.

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Posted in Economic Data |