Monthly Archives: May 2017

New Fed survey shows modest growth, though signs appear that optimism has waned

Bloomberg/Christopher Condon/05-31-17

The U.S. economy continued to grow “modestly” or “moderately” in nearly all regions in recent weeks, though new signs appeared that optimism has waned in some districts, a Federal Reserve survey showed.

The central bank’s Beige Book economic report, based on anecdotal information collected by the 12 regional Fed banks through May 22, said several sectors from manufacturing to housing continued to expand slowly. Consumer spending softened, however, with many districts reporting little or no change in non-auto retail sales.

“A majority of districts reported that firms expressed positive near-term outlooks; however, optimism waned somewhat in a few districts,” according to the report, released Wednesday in Washington.

Share
Posted in Central Banks, Economy |

Why gold is up today . . .

Up $10 as this is posted.

A Wall Street Journal article published this morning might have inspired new  fund/institutional buying.  The WSJ is often used by the Fed to channel messages to the market and this looks like one of those articles. It suggests that a rate hike might be on hold for September although the June hike is still a likelihood.  The article cited political wrangling in Congress and a possible government shutdown as primary reasons for putting September on hold.  Another aspect of the Fed’s agenda – unwinding the balance sheet – was also covered. It seems the board is leaning toward retiring its holdings gradually as debt instruments mature rather than any sort of wholesale dumping. The go-slow approach is meant, according to the WSJ, as an attempt to ward off a future “taper tantrum” in the bond market.  Gold apparently likes the new agenda, or at the very least, likes the fact that the Fed has decided to be cautious on both rates and the balance sheet.  MK

Here’s a Barron’s take on the Wall Street Journal article: Will Political Wrangling Alter The Fed’s Rate Hike And Taper Timeline – Uncertainty in Washington may shake up the central bank’s plans beyond June.

Share
Posted in all posts |

The Daily Market Report: Gold Extends to the Upside as Dollar Slides


USAGOLD/Peter Grant/05-31-17

Gold is extending to the upside, establishing new 5-week highs above yesterday’s high at 1270.45. The yellow metal is being underpinned by a myriad of fundamentals that are stimulating safe-haven interest, as well as a weaker dollar.

The dollar index has given back nearly all of its recent gains, leaving last week’s low at 96.80 vulnerable to a retest. In the bigger picture, the greenback has retraced all of its post-election gains that were attributed to hopes that the new President would enact substantial reforms to stimulate the sluggish U.S. economy.

As the President became mired in setbacks and investigations, his agenda stalled and markets seemed to lose faith that any meaningful legislation could get pushed through. The exception of course is the stock market, which remains well bid, although there remains some concerns about the breadth of that rally. The dollar index has fallen 6.6% from its January highs.

The dollar has been gradually losing its stature as the global reserve currency. Fitch has warned that two pieces of draft legislation – the Federal Reserve Transparency Act and the Financial Choice Act – threaten to undermine Fed independence and hurry the dollar along the path to its replacement.

“Investors considering dollar assets and other dollar exposures would weigh the risk of political interference in monetary policy decisions and the possibility of the Fed’s remit being broadened to include congressional priorities such as indirect funding of infrastructure investment.” — James McCormack, global head of sovereign ratings at Fitch

Let’s be honest here: The Fed is already engaged in indirect funding of the government, as evidenced by its $4.4 trillion balance sheet, chock-full of Treasuries. I’m no huge fan of the Fed, but the thought of politicians having greater sway over monetary policy makes me shutter.

In Congress’s failure to act during the financial crisis, it forced the Fed to make some rather dangerous decisions that have led to even more debt and asset price frothiness. Why would anyone think that our partisan legislative bodies, could effectively manage the monetary and financial systems?

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

MNI now says Chicago PMI rose to 59.4 in May, above expectations 57.5, vs 58.3 Apr and 55.2 initially reported.

Share
Posted in Economic Data |

Gold firms as Fed’s Beige Book could shed light on rate hikes past June


MarketWatch/Rachel Koning Beals/05-31-17

Gold prices tipped higher Wednesday as the dollar softened, but gains were capped ahead of the afternoon release of the Federal Reserve’s snapshot of economic activity, a report not expected to derail the Fed from a widely telegraphed June interest-rate hike.

The Beige Book report, which gathers economic anecdotes from across the Fed’s districts, is due for release at 2 p.m. Eastern. The report can reveal the spotty nature of economic expansions. And traders are hungry for clues on what the Fed might do past its June meeting.

…While a largely upbeat Beige Book report is expected, “a gloomy tone echoing mostly disappointing U.S. economic data outcomes over the past six weeks may cool bets on rate hikes beyond next month’s sitdown, breathing new life into the yellow metal,” said Ilya Spivak, strategist with Daily FX.

Share
Posted in Gold News, Gold Views |

U.S. NAR pending home sales -1.3% to 109.8 in Apr, below expectations of 112.0, vs 111.3 in March; -5.4% y/y.

Share
Posted in Economic Data |

Morning Snapshot: Gold remains well bid near 5-week highs

USAGOLD/Peter Grant/05-31-17

Gold remains generally well bid, just off the 5-week high set yesterday at 1270.45. Geopolitical and political uncertain, growth risks, inflation worries and record debt levels all conspire to underpin the yellow metal.

Silver is at a key technical juncture: The 50-day moving average is at 17.47 today. The 200-day moving average is at 17.55. The 61.8% retracement of the mid-April to early-May decline comes in at 17.65. A push through this area would shift attention back to the high for the year at 18.64.

The MBA mortgage market index for last week fell by 3.4%. Also on the U.S. calendar today is Chicago PMI, pending home sales, April Ag prices and the Fed’s Beige Book.

Share
Posted in Gold News, Gold Views, Snapshot |

Another Warning Sign Flashes for Subprime Auto Loans

Bloomberg/Matt Scully/05-30-17

Fewer subprime borrowers are paying off their auto loans early, a possible sign that consumers with weaker credit scores are struggling more, according to a report by Wells Fargo & Co. researchers.

Borrowers are making fewer extra payments on loans that were bundled into bonds in 2015 and 2016, compared with loans in 2013 and 2014 bonds, according to Wells Fargo analysts led by John McElravey. The data on prepayments may offer another sign that subprime consumers are having more trouble paying their bills, the analysts wrote in a note dated Tuesday. Borrowers are already defaulting on a growing amount of auto debt.

Last decade, slower monthly payment rates on credit cards were an early sign of the consumer credit cycle changing for the worse, the analysts wrote.

Share
Posted in Debt |

Gold higher at 1266.90 (+4.22). Silver 17.37 (+0.011). Dollar lower. Euro higher. Stocks called higher. U.S. 10-year 2.21% (+1 bp).

Share
Posted in Markets |

The Daily Market Report: Gold Remains Firm, Amid Rising Debt Concerns


USAGOLD/Peter Grant/05-30-17

Gold is maintaining a generally firm profile, having established a new 5-week high at 1270.45 in earlier trading. Geopolitical and political concerns, renewed dollar weakness and fresh worries about waning inflationary pressures are all helping to underpin the yellow metal.

Focus this week is on Friday’s job report. Median expectations are for 182k nonfarm payrolls. The jobless rate is expected to hold steady at 4.4%.

Further out, the next FOMC meeting is on June 13-14. As revealed in minutes from the May meeting, incoming data (particularly inflation data) are going to be important in determining whether the present gradual tightening path is perpetuated, or there is a pause.

The third consecutive monthly decline in annualized core PCE that came out today may give the Fed some pause, but whether they actually do pause or not remains to be seen. The market doesn’t seem too concerned, with the probability of a June rate hike still close to 90% according to Fed funds futures.

Here’s what should be a greater concern to the Fed, given their current tightening trajectory:

Virtually every class of US debt — sovereign, corporate, unsecured household/personal, auto loans and student debt — is at record highs. — FT

It’s like we learned nothing at all from the financial crisis; a crisis that brought the financial systems to the very brink of collapse. Former Fed chair Ben Bernanke conceded in a private interview with the Financial Crisis Inquiry Commission that 12 of the 13 most important financial institutions were on the verge of failure in 2008.

“If you look at the firms that came under pressure in that period … only one … was not at serious risk of failure.” — Ben Bernanke

Everyone should remember that the global financial crisis that occurred about a decade ago was started by the U.S. subprime mortgage market. At the time, the value of American subprime mortgages was about $1.3 trillion.

Right now, student loan debt is more than that, at $1.44 trillion. Outstanding auto loans are nearly that much, at $1.17 trillion, and many fall into the subprime category.

In an echo of the subprime housing crash, delinquencies of US car loans are rising amid allegations of mis-selling. — FT

Total household debt now stands at a record $12.7 trillion. Our national debt is just about $20 trillion. The Fed’s balance sheet remains at $4.4 trillion.

You might have thought that the near financial catastrophe might have prompted people and institutions to deleverage. Clearly that has not been the case. Everyone — from the government, to the Fed, to individuals — decided to paper-over their debt problem with more debt. And what we have to show for it is a decade of lackluster growth and an even larger future problem.

It’s pretty simple really: If you want to get out of a hole, the first thing you have to do is ‘STOP DIGGING’.

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

Thinking the Unthinkable With North Korea

NYT/Graham Allisonmay/05-30-17

President Trump has promised the world that he will “solve” the North Korean nuclear crisis before the country’s leader, Kim Jong-un, can screw a nuclear weapon onto a missile that can reach San Francisco or Los Angeles, a grim feat that experts say he is on track to achieve during Mr. Trump’s first term. The president is right to point out that his predecessors succeeded only at kicking this problem down the road. But Mr. Trump hasn’t said how he plans to solve the problem.

…What we see unfolding now is a Cuban Missile Crisis in slow motion. In the most dangerous moment in recorded history, to prevent the Soviet Union from placing nuclear-tipped missiles in Cuba, John F. Kennedy was prepared to take what he confessed was a one-in-three chance of a nuclear war with the Soviet Union. What risk will Mr. Trump run to prevent North Korea acquiring the ability to strike the United States?

Share
Posted in Geopolitical Risks |

U.S. consumer confidence fell to 117.9 in May, below expectations of 120.0, vs negative revised 119.40 in Apr (was 120.3).

Share
Posted in Economic Data |

North Korea warns of ‘bigger gift package’ for U.S. after latest test

Reuters/Ju-min Park & Jack Kim/05-30-17

North Korean leader Kim Jong Un supervised the test of a new ballistic missile controlled by a precision guidance system and ordered the development of more powerful strategic weapons, the North’s official KCNA news agency reported on Tuesday.

The missile launched on Monday was equipped with an advanced automated pre-launch sequence compared with previous versions of the “Hwasong” rockets, North Korea’s name for its Scud-class missiles, KCNA said. That indicated the North had launched a modified Scud-class missile, as South Korea’s military has said.

The North’s test launch of a short-range ballistic missile landed in the sea off its east coast and was the latest in a fast-paced series of missile tests defying international pressure and threats of more sanctions.

Share
Posted in Geopolitical Risks |

Gold hits 1-mth high, geopolitical tensions support


Reuters/Nithin ThomasPrasad/05-30-17

Gold edged up to touch a one-month high on Tuesday, with investors turning to the safe-haven asset as geopolitical tensions sapped their appetite for risk.

…Risk surrounding the closeness of Britain’s upcoming elections, the prospect of early elections in Italy and worries over Greek debt were supporting gold, said Jeffrey Halley, a senior market analyst at OANDA.

“The picture will get more muddy as the week goes on as we have a lot of data from around the world coming in,” he said.

Share
Posted in Gold News, Gold Views |

Global debt woes are building up to a tidal wave

FT/Dambisa Moyo/05-30-17

Virtually every class of US debt — sovereign, corporate, unsecured household/personal, auto loans and student debt — is at record highs. Americans now owe $1tn in credit card debt, and a roughly equivalent amount of student loans and auto-loans which, like the subprime mortgage quality that set off the 2008 financial crisis, are of largely low credit quality (and therefore high risk).

US companies have added $7.8tn of debt since 2010 and their ability to cover interest payments is at its weakest since 2008, according to an April International Monetary Fund report. With total public and private debt obligations estimated at 350 per cent of gross domestic product, the US Congressional Budget Office has recently described the path of US debt (and deficits) as almost doubling over the next 30 years.

But this is not just a US phenomenon. Globally, the picture is similarly precarious, with debt stubbornly high in Europe, rising in Asia and surging across broader emerging markets. A decade on from the beginning of the financial crisis, the world has the makings of a fresh debt crisis.

PG View: It’s as if we learned absolutely nothing over the past 10-years.

Share
Posted in Debt |

Morning Snapshot: Gold retreats modestly after setting 5-week highs

USAGOLD/Peter Grant/05-30-17

Gold hit a 5-week high at 1270.45 in overseas trading, before dipping back into the range. With the fundamentals and technicals still generally supportive, shirt term dips will likely viewed as buying opportunities.

U.S. data out this morning shows that home prices continued to appreciate at a solid pace in March, but broader inflationary pressures are waning. The Case-Shiller home price index for 20-cities gained +1.0% in March, above expectations. Meanwhile, core PCE eased to 1.5% y/y in April; the third consecutive monthly decline.

That is suggestive that the December and March rate hikes may have sapped the upward price pressures that the Fed worked so hard to generate. Prospects for another 25 bps hike in June remains all-but a sure-thing, although the inflation data may weigh on those expectations.

Share
Posted in all posts, Gold News, Gold Views, Snapshot |

U.S Case-Shiller home price index for 20-cities +1.0% (nsa) in Mar to 195.4, above expectations of 194.4, vs 193.5 in Feb (+0.4%).

Share
Posted in Economic Data |

Key US inflation measure falls for third straight month

FT/Pan Kwan Yuk/05-30-17

A key measure of US inflation fell for a third straight month in April, easing pressure on the Federal Reserve to step up the pace of interest rate rises beyond the three it has penned in for this year.

The core personal consumption expenditures price index (PCE), eased to a year-on-year pace of 1.5 per cent last month, compared to the 1.6 per cent rate it was at in March, according to data released Tuesday morning by the Commerce Department.

PG View: I’m not sure if this is enough to give the Fed pause…but it probably should…

Share
Posted in Economic Data, inflation |

U.S. personal income +0.4% in Apr, in line with expectations, vs +0.2% in Mar. PCE +0.4%, as expected, vs positive revised +0.3% in Mar.

Share
Posted in Economic Data |

Gold lower at 1260.47 (-6.65). Silver 17.30 (-0.118). Dollar lower. Euro higher. Stocks called lower. U.S. 10-year 2.24% (unch).

Share
Posted in Markets |

Gold books highest settlement in a month, 3rd straight weekly rise


MarketWatch/Myra P. Saefong & Rachel Koning Beals/05-26-17

Gold on Friday closed at its highest level of the month, lifting prices for a third week in a row as a fresh round of geopolitical jitters offset expectations for higher U.S. interest rates, which would otherwise be bearish for gold prices.

Investors were watching North Korea, this weekend’s Group of Seven meeting, the coming U.K. elections, and developments surrounding the Trump administration—all helping to boost gold’s appeal as a hedge against uncertainty.

“At the moment it’s increasing political uncertainty that is driving the gains rather than [Federal Reserve] speculation,” Colin Cieszynski, chief market strategist at CMC Markets, told MarketWatch.

Share
Posted in Gold News, Gold Views |

Week in Review (Video) – May 26, 2017

Link to Special Report: A Crisis in the Making and What it Means for Gold

Share
Posted in USAGOLD TV | Tagged , , , , , |

The Daily Market Report: Gold Jumps By More Than 1% Ahead of Holiday Weekend


USAGOLD/Peter Grant/05-26-17

Gold surged to pressure the four-week high 1270.38, buoyed by ongoing political and geopolitical concerns. These gains further improve the near-term technical picture and may be prompting short covering ahead of the long holiday weekend.

Geopolitical tensions ratcheted higher after President Trump pledged to solve the “Big problem” that is North Korea. NBC news is reporting that Jared Kushner, the president’s son-in-law and a senior advisers, has “come under FBI scrutiny in the Russia investigation.” With the FBI now probing the President’s inner-circle, the political uncertainty is on the rise as well.

The China Gold Association recently reported a 9.3% decline in Q1 gold production to 101.197 mt, versus 111.563 in the previous year. China is of course both the world’s largest producer and consumer of gold.

The production decline was attributed to China’s plan to consolidate and modernize its mining industry. China’s Ministry of Industry and Information Technology says they plan to shutter 150 mines by 2020, which would equate withe a reduction in capacity of about 40 mt.

However, China’s official news agency Xinhua contends that annual gold output will rise to 500 tonnes over that same period. Presumably as assets are shifted from lower producing and higher cost mining operations, new efficiencies will be achieved.

In the interim it appears that China is prepared to bridge the gap by increasing imports. Gold imports surged 64.5% to 10.467 mt in Q1, almost exactly matching the annualized drop in mining output.

Chinese gold demand was robust in Q1 at 304.14 mt, a 14.7% increase over Q1-16. If demand remains strong, but domestic production continues to be suppressed, the Chinese will have to increasingly turn to global markets for supply. That dynamic would likely have a positive impact on the price of gold.

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

Gold Rises to Four-Week High

WSJ/Stephanie Yang/05-26-17

Gold prices rose to a four-week high Friday, boosted by increased demand for haven assets amid uncertainty about economic and political stability.

Share
Posted in Gold News, Gold Views |

The story behind continuing strong bullion coin demand

2016 was a very good year for both gold and silver in aggregate global mint sales

by Michael J. Kosares

I have always considered sales of modern gold and silver bullion coins a bellwether on the general health of the global precious metals market. In reality, though, bullion coin sales comprise only a very small portion of the physical gold and silver markets. According to the World Gold Council, modern gold coins make up only about 13% of investment demand and a little less than 5% of overall demand.* Yet, as is often the case in statistical inquiry, it is the small and often unobserved, sometimes even ignored, that can accurately tell the larger story – particularly when it reflects the net effect of human action within the greater economy and financial markets.

So how is it that such a small aspect of the global gold market in terms of the overall volume can at the same time be so important?

In a nutshell, it is because the demand among ordinary private investors is telling us something very important: The level of confidence people have in the economy and the plan being carried out by the central planners in charge. Twentieth-century economist Joseph Schumpeter (1883-1950), most famous for his theory of creative destruction in capitalist economies, said it best: “The modern mind dislikes gold because it blurts out unpleasant truths.” I am quite certain that the “modern mind” to which Schumpeter referred was a collective term for the social and economic planners responsible to this day for the construction and maintenance of the fiat money economy.**

With that for initial spade work, let’s take a look at the demand for modern gold and silver bullion coins to see what they might be “blurting out” at this juncture in economic history. First and foremost, the numbers tell us that though Washington and the mainstream media may have recovered psychologically from the 2007-2008 crisis, the investing public has not. In fact, by implication the numbers tell us that concerns about a repeat, or better put, an extension, of that crisis still run high among investors.

The charts depict two different eras for gold and silver bullion coins – the one before the crisis and the one after. The strong consumption in 2016, in that respect, is decidedly a continuation of a well-established trend that began in 2008. For gold, 2016 was the fifth best year on record in terms of sales and in a virtual dead heat with 2015. For silver, 2016 was the fifth best year on record coming after last year’s record sales. Since 2016 was a relatively calm year in financial markets, the question arises how high demand might go if another crisis were to suddenly ignite.

Another lesson in these charts, and one that should not be overlooked, is that the record performances in both precious metals since 2008 did not occur in an inflationary environment, but in a distinctly disinflationary one. The strong and continuing post-crisis demand, running consistently at five to nine times pre-2007 levels, belies the mainstream media’s unremitting mantra that the precious metals are an inflation hedge and inflation hedge only. In that regard, silver is the big surprise. Prior to the current period, silver was generally viewed as an industrial metal with some investment potential and rarely a safe-haven or crisis hedge. Now investors give silver nearly the same credence they do gold for asset preservation purposes.


FREE SUBSCRIPTION and access to this month’s edition of News & Views.  This month we explore the big issues in Washington and how they are likely to affect gold in the months ahead; the mechanics of how algo-trading might create a stock market panic and much more.   Several timely charts are included. We invite your free subscription at no obligation.


* These totals include only current year bullion coins and does not include the large volume in previous mintages traded in the secondary market globally. There is no accurate accounting available for the secondary market, but it would add significantly to the annual turnover demand if it were tracked.
** Complete quote: “In the first place, the ‘classic’ writers, without neglecting other cases, reasoned primarily in terms of an unfettered international gold standard. There were several reasons for this but one of them merits our attention in particular. An unfettered international gold standard will keep (normally) foreign-exchange rates within specie points and impose an ‘automatic’ link between national price levels and interest rates. The modern mind dislikes the this automatism, as much for political as for economic reasons: it dislikes the fetters this automatism clasps on government management of the economic process – dislikes gold, the naughty boy who blurts out unpleasant truths. But most of the economists of the period under survey liked it for precisely the same reasons. Though they compromised in practice as in theory and though they admitted central-bank management, the automatism – a phrase beloved by Lord Overstone [Samuel Jones Loyd, 1st Baron Overstone] – was for them, who are neither nationalists nor etatistes, a moral as well as an economic ideal.” –– Joseph Schumpeter, History of Economic Analysis (1954) Published posthumously
Charts compiled and designed by USAGOLD’s Jen Dentry with the assistance of the mints surveyed.
Share
Posted in all posts, Author, MK |

Here’s What It Would Take for Gold to Hit $2,000

Madison.com/Scott Levine/05-26-17

Uncertainty in Washington, the absence of interest rate hikes, and a fall in the dollar are all factors tied, individually, to the rise in the price of gold. Should these three factors all occur concurrently, however, it could create a scenario which results in market participants racing to increase their positions in gold — a scenario that could very reasonably result in the metal breaking new ground, reaching $2,000.

Share
Posted in Gold News, Gold Views |

University of Michigan sentiment (final) revised down to 97.1 in May, below expectations of 97.5, vs 97.7 prelim and 97.0 in Apr.

Share
Posted in Economic Data |

Gold Up, At 4-Week High, On Weak Greenback, Some Risk Aversion


Kitco News/Jim Wyckoff/05-26-17

Gold prices are posting decent gains and have hit a four-week high in early U.S. trading Friday. A weaker U.S. dollar index on this day is helping out the gold market bulls. Also, there is just a bit of risk aversion in the marketplace heading into a long U.S. holiday weekend. News that President Donald Trump’s son-in-law is being investigated by the FBI regarding Russia’s involvement in the U.S. presidential election is also adding some uncertainty to the marketplace.

Share
Posted in Gold News, Gold Views |

Morning Snapshot: Gold surges to 3-week highs

USAGOLD/Peter Grant/05-26-17

Gold charged to a new 3-week high amid resurgent geopolitical concerns. This seems to be overriding this morning’s better than expected U.S. economic data.

President Trump acknowledged to Japanese PM Abe that North Korea is a “big problem” and pledged that that problem will be “solved.” The markets seem to have interpreted that as a threat.

“It is very much on our minds… It’s a big problem, it’s a world problem and it will be solved. At some point it will be solved. You can bet on that.” — President Donald Trump

The first revision to Q1 GDP came in better than expected at +1.2%. Durable goods orders for April also beat expectations, falling 0.7% on expectations of -1.1%. March saw a significant upward revision to +2.3%, versus +0.7% previously.

This certainly keeps the June rate hike on the table. Minutes of the last FOMC meeting revealed that the Fed waffled a little in May. Today’s should renew confidence that there’s another 25 bps hike coming in several weeks.

The dollar firmed accordingly, but gold is maintaining its gains. Given the political and geopolitical uncertainty, traders may be reluctant to carry short gold positions into the long holiday weekend.

Share
Posted in Gold News, Gold Views, Snapshot |

U.S. Q1 GDP revised to +1.2%, above expectations of +0.8%, vs +0.7% preliminary print.

Share
Posted in Economic Data |