Monthly Archives: June 2017

The Daily Market Report: Gold Consolidates Amid Uncertainty Over Inflation Risks


USAGOLD/Peter Grant/06-30-17

Gold is consolidating within the recent range, ahead of the pre-holiday weekend. Markets are open on Monday for a partial session and then closed on Tuesday, July 4 in observance of Independence Day.

There seems to be some conflict in the gold market as the mindset shifts from inflation expectations back to disinflation. Investors that bought gold in anticipation of the Trump reflation trade are having to rethink that decision with the President’s economic agenda bogged down and the data showing that price pressures are indeed ebbing.

Data out this morning reflects weakness in both consumer spending and inflation. PCE rose just 0.1% in May, while the chain price index fell 0.1%.

While some inflation based trades may be getting unwound, it’s worth remembering how well gold performed during bouts of disinflation, stagflation and deflation. Hint: Gold performed exceptionally well!

It is the central banks that are fomenting the confusion. The supposedly data driven Fed continues on its tightening path, disregarding the realities of the inflation and growth data. Both the ECB and BoE jumped on the bandwagon this week, striking markedly more hawkish tones and driving global bond yields higher, even though growth remains tepid and there is nary a whiff of inflation.

There are undoubtedly some that believe the central bank narrative that inflation is in the offing and policy must be tightened to prevent an overshoot. However, the predicative abilities of these institutions have been called into question over the years.

If inflation risks are indeed dead, gold should be just fine as negative price risks signal heightened growth and systemic risks. At that point safe-haven buyers will step in to support the yellow metal. It may also prompt the central banks to reverse course, further eroding their credibility in the process.

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

University of Michigan sentiment (final) revised up to 95.1 in Jun, above preliminary print of 94.5, but down from 97.1 in May.

Share
Posted in Economic Data |

Chicago PMI surged to 65.7 in Jun, well above expectations of 58.0, vs 59.4 in May.

Share
Posted in Economic Data |

Gold set to slide a second session as dollar steadies

MarketWatch/Mark DeCambre/06-30-17

Gold prices looked set to notch a second straight decline on Friday, capping an up-and-down week marked by a swift change in global-market sentiment as a world-wide bond rout drove yields higher and diminished appetite for precious metals.

…Metals added to losses after a report showed that the Federal Reserve’s preferred measure of inflation, the price index for personal-consumption expenditures, fell 0.1% in May from the prior month. Excluding the often-volatile categories of food and energy, so-called core prices were up 0.1% in May.

PG View: While there may be some inflation based trades getting unwound, gold has performed exceptionally well during the worst deflationary environments in history.

Share
Posted in Gold News, Gold Views |

Consumer spending is weak in May, but so is inflation

MarketWatch/Jeffry Bartash/06-30-17

Americans barely increased spending in May and choose to save more money instead even as decelerating inflation gave them more bang for the buck.

Consumer spending rose 0.1% last month after back-to-back 0.4% gains in April and March, the Commerce Department reported Friday. That matched the Marketwatch forecast of economists.

The meager increase in spending took place against a backdrop of slowing inflation.

PG View: Not typically an environment where the central bank would be tightening policy.

Share
Posted in Economy, inflation |

How central bankers rattled global markets

FT/Dan McCrum, Roger Blitz, Robin Wigglesworth/07-30-17

The first conclusion is a simple one: little matters more in world markets right now than views of the select group invited to Portugal by the ECB. “Central bankers have us at their beck and call again,” says Brad Bechtel at Jefferies International.

What they were trying to communicate, says Bob Michele, head of fixed income for JPMorgan Asset Management, “is that the 30-year bull market is over and things should go back to normal”.

PG View: The worry of course is that they’re calling the bond market rally over very, very deep in the business cycle. Additionally, higher yields are going to make servicing the trillions and trillions of new debt added since the financial crisis really difficult.

Share
Posted in Central Banks, Markets, Monetary Policy |

Morning Snapshot: Gold remains defensive within recent range

USAGOLD/Peter Grant/06-30-17

Gold remains defensive within the range, heading into the pre-holiday weekend. U.S. markets will be open on Monday, July 3, although hours will be abbreviated. I suspect trading will be thin until Wednesday next week.

The greenback has caught a little bit of a bid, moving the dollar index of the the 8-month lows set yesterday. While dollar gains a likely only corrective in nature, it has applied a little additional pressure to gold.

Personal income for May rose 0.4%, just above expectations of 0.3%, but April was revised lower. PCE edged up 0.1%, in line with expectations. We’ll also hear FedSpeak from St. Louis Fed’s Bullard.

Manufacturing ISM for June and May construction spending will be reported during Monday’s holiday shortened session.

Share
Posted in Gold News, Gold Views, Snapshot |

U.S. PCE chain price index -0.1% in May, vs +0.2% in Apr; ex-food and energy +0.1%, vs negative revised +0.1% in Apr.

Share
Posted in Economic Data |

U.S. personal income +0.4% in May, above expectations of +0.3%, vs negative revised +0.3% in Apr. PCE +0.1%, in line with expectations.

Share
Posted in Economic Data |

Gold lower at 1241.12 (-5.60). Silver 16.61 (-0.084). Dollar higher. Euro lower. Stocks called higher. U.S. 10-year 2.28% (+1 bp).

Share
Posted in Markets |

Week in Review (Video) June 29, 2017

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

The Daily Market Report: Gold Weighed by Rise in Yields, Supported by Weak Dollar


USAGOLD/Peter Grant/06-29-17

Gold has retreated into the range, weighed by a rise in global yields as central banks are suddenly following the lead of the Fed and adopting more hawkish tones. U.S. yields are up as well, but the dollar index is plumbing 8-month lows and helping to limit the yellow metal’s downside.

Perhaps the ECB and BoE were starting to get worried about the widening interest rate differentials with the U.S. Certainly the realities of the data don’t warrant any more optimism about the true state of their economies than here in the U.S.

Investment expert John Mauldin has a theory about why the Fed is ignoring the data and continues to tighten monetary policy, even though we all know that “Fed tightening cycles always end with a US market crash or an emerging-market crash or both (but usually just a US market crash).”

Mauldin believes that the Fed believes the complexion of the central bank is about to change dramatically. As we discussed earlier in the year, three of the seven seats on the Board of Governors are presently vacant. President Trump can make appointments to the vacant seats whenever he is ready. There is scope that he may replace both Yellen and Fischer next year as well.

Mauldin reminds us that “the FOMC works by consensus” with the Fed chair striving “mightily” to get everyone on the same page. As such, most decisions end up being unanimous. The stability associated with that unanimity is important to the U.S. banking system, the broader global financial system and private businesses as well.

“Enter Donald Trump, for whom stability is a lesser priority.”

I believe a faction on the FOMC wants to cement its own preferred policies in place and make it difficult or impossible for a new majority to change course in 2018 or thereafter. Yellen, Fischer, and Dudley all seem to be of that mind, and they are now taking a hawkish approach to monetary policy. That’s why they don’t want to do the otherwise sensible thing, which is to wait for more evidence that inflation is a problem before tightening further, especially so late in the recovery cycle. — John Mauldin

Such political maneuvering — if that is what’s going on — is certainly outside the Fed’s mandate. Of course, to suggest that this creation of Congress is somehow immune to politics, even if it is the personal politics of its members, would be incredibly naive.

A fractious FOMC would sow the seeds of uncertainty and market instability. But even the process of trying to prevent this — of raising rates into economic weakness — is cause for concern as well.

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

Gold eases as central bank comments lift yields


Reuters/Jan Harvey/06-29-17

Gold eased on Thursday, surrendering early gains as signs this week that central banks may scale back their ultra-loose monetary policy pushed bond yields higher, though a decline in the dollar to its lows for the year lent support.

…”Gold is caught between the weaker dollar and higher real yields,” UBS analyst Joni Teves said. “That’s feeding through to price action.”

“There has been a shift towards more hawkishness (among central banks),” she said. “We have been flagging the potential for European rates to head higher and exert pressure on global yields.”

Share
Posted in Gold News, Gold Views |

India gold premiums jump to 7-1/2-month high ahead of tax hike

Reuters/Rajendra Jadhav & Nithin ThomasPrasad/06-29-17
Gold premiums in India jumped to the highest level in 7-1/2 months this week as consumers advanced purchases to avoid paying higher tax when a new nationwide sales tax takes effect from July 1.

India, the world’s second-biggest gold consumer, has said it will impose a 3 percent goods and services tax (GST) on gold, up from 1.2 percent currently.

The GST will replace a slew of federal and state levies from Saturday, transforming Asia’s third-largest economy into a single economic zone with common indirect taxes.

While gold demand is usually weak in June, jewellery showrooms in key Indian cities like Mumbai and Kolkata were crowded this week.

Share
Posted in Gold News, Gold Views |

Gold stages a retreat as government bond yields jolt higher

MarketWatch/Mark DeCambre/06-29-17

Gold prices threatened to snap a three-session climb on Thursday as a global rise in government bond yields diminished the appeal of investing in precious metals that don’t bear interest.

…Moves were fueled in part by a world-wide selloff in bonds that were pushing prices of sovereign paper lower and yields higher. Yields of U.S. Treasurys, notably the 10-year Treasury note and European bonds, like the comparable German bond shot to their highest levels in more than a month. The 10-year Treasury note was at 2.28%, compared with 2.146% to start the week, while the 10-year German bond, known as the bund, was yielding 0.43%, compared with 0.254% at the start of the week.

…“We have a balanced gold outlook with our 6/12 month forecasts at $1250/oz. On the one hand, we expect higher US real rates and Fed balance sheet reduction to put downward pressure on gold,” the Goldman note said. That said, said pressure on the yellow metal going forward may be offset by weak U.S. global growth, appetite for precious metals from emerging-markets amid expected softness in the dollar and peak supply late in 2017. “Making gold more attractive to longer term investors.”

Share
Posted in Gold News, Gold Views |

Morning Snapshot: Gold retreats after positive Q1 GDP revision

USAGOLD/Peter Grant/06-29-17

Gold is back on the defensive after this morning’s positive Q1 GDP revision. Growth in the first 3-months of the year was revised to 1.4%, above expectations of 1.2%.

U.S. yields have rebounded from recent lows, which has moved the dollar off the fresh 8-month lows established in earlier trading. Nonetheless, the dollar index is still trading lower on the day. Persistent weakness in the greenback should help to limit the downside in gold.

Initial jobless claims rose 2k to 244k last week. Continuing jobless claims rose 6k to 1948k. Later this morning we have the Bloomberg consumer comfort index, M2, Ag prices and EIA natural gas stocks. We’ll also hear FedSpeak from St. Louis Fed President Bullard.

Share
Posted in Gold News, Gold Views, Snapshot |

U.S. Q1 GDP revised up to 1.4%, above expectations of 1.2%, vs 1.2% at 2nd revision and 2.1% in Q4.

Share
Posted in Economic Data |

U.S. initial jobless claims +2k to 244k in the week ended 24-Jun, above expectations of 240k.

Share
Posted in Economic Data |

Gold lower at 1245.20 (-4.92). Silver 16.77 (-0.067). Dollar lower. Euro higher. Stocks called mixed. U.S. 10-year 2.28% (+5 bps).

Share
Posted in Markets |

The Daily Market Report: Gold Consolidates as Dollar Continues Slide


USAGOLD/Peter Grant/06-28-17

Gold is trading little changed on the day after failing to set new highs for the week. Nonetheless, the fact that Monday’s flash crash was nearly completely retraced is seen as encouraging.

Markets seemed to be a bit confused by all the newfound, but unsupported hawkishness. Yesterday the ECB’s Mario Draghi surprised with a rather hawkish tone. While the central bank tried to walk that back today, the euro remains well bid. BoE Governor Mark Carney has now added his voice as well.

“Some removal of monetary stimulus is likely to become necessary,” said Carney. His hawkish tone emerges just weeks after an election upset and right in the midst of Brexit negotiations. Sterling surged to 3-week highs putting further pressure on the dollar.

The Fed was the first mover on hawkishness, resulting in a multi-year rally in the greenback. However, as Fed tightening has proven to be much slower than expected, the dollar rally has faltered. With the ECB and BoE now making noise about normalization (narrowing interest rate differential) the dollar index has fallen to new 7-month lows.

A weaker dollar tends to be supportive to the gold price, as gold is priced in dollars. As long as the greenback remains under pressure, it is likely that the yellow metal will remain underpinned. If gold is able to move back above resistance at 1257.41/1258.90, the highs for the year at 1295.03/1296.06 would be back in play.

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

Sterling surges to 3-week high, FTSE falls on Carney rate hike signal

Reuters/Jemima Kelly, Kit Rees, John Geddie & David Milliken/06-28-17

Sterling surged to a three-week high and Britain’s main FTSE 100 stock index fell on Wednesday, after Bank of England Governor Mark Carney said the Bank was likely to need to raise interest rates and would debate this “in the coming months”.

The pound jumped a cent to $1.2943 after the speech’s release, its strongest since June 9, the day of the results of Britain’s parliamentary elections. That left sterling up around 1 percent on the day.

PG View: Carney jumps on the normalization bandwagon.

Share
Posted in Central Banks, Monetary Policy |

U.S. NAR pending home sales index -0.8% to 108.5 in May, below expectations of 109.2, vs negative revised 109.4 in Apr.

Share
Posted in Economic Data |

Hubris Kills Whilst Gold Protects

24hGold/Egon von Greyerz/06-27-17

Hubris is a deadly sin. It is an arrogance and conceit of the highest degree that eventually leads to failure. As we reach the final stages of the current economic cycle, hubris is prevalent everywhere. Central bankers and bankers believe that they can continue to create wealth by printing and borrowing money. Since it has worked so well for 100 years in this latest cycle, why can’t it continue?

…Long term, no one has ever got away with creating a system based on fake money, unlimited debt, zero or negative cost of money with the government and the bankers being the main beneficiaries.

PG View: von Greyerz wrote this piece last week, before the supreme hubris of Janet Yellen yesterday when she said she doesn’t believe we’ll see another financial crisis in our lifetime. “Now is the moment to acquire wealth protection insurance in the form of gold,” says von Greyerz.

Share
Posted in Gold News, Gold Views |

ECB chief was overinterpreted by markets: sources


Reuters/Francesco Canepa/06-28-17

European Central Bank President Mario Draghi intended to signal tolerance for a period of weaker inflation, not an imminent policy tightening, when his comments sent the euro higher this week, sources familiar with Draghi’s thinking said on Wednesday.

Draghi’s intention was to set up September as the earliest the bank would discuss rolling back stimulus, they said, but stressed it was by no means certain that it would come to a decision then.

“The market failed to take note of the caveats in Draghi’s speech,” one of the sources said.

Share
Posted in Central Banks, Economy, Monetary Policy |

Morning Snapshot: Gold underpinned by continued dollar weakness

USAGOLD/Peter Grant/06-28-17

Gold is slightly higher, underpinned by fresh 7-month lows in the dollar index. The greenback is being pressured by dwindling expectations that the Trump reflation agenda will be advanced this year.

The ECB tried to soften Mario Draghi’s taper-talk from yesterday, saying that the markets misjudged his comments and his intent was to be more balanced. While that knocked the euro off the 12-month highs set earlier in the session, the trend in the euro remains positive. And that’s going to weigh on the dollar.

The market also continues to digest the hubris of Janet Yellen when she said another crisis was unlikely to happen in this lifetime. That’s an awful lot of faith in policymakers’ abilities to keep all the plates spinning, even as the number of plates (debt) continues to expand.

The U.S. trade deficit narrowed modestly in May, coming in near expectations. Later this morning we have NAR pending home sales and EIA data. Tomorrow we’ll get the third look at Q1 GDP and I’m expecting a downward revision.

Share
Posted in Gold News, Gold Views, Snapshot |

U.S. advance goods trade gap narrowed to -$65.9 bln in May, near expectations of -$66.0, vs revised -$67.1 in Apr.

Share
Posted in Economic Data |

U.S. MBA mortgage market index -6.2% in the week ended 23-Jun; purchases -4.1%, refis -8.6%.

Share
Posted in Economic Data |

Gold higher at 1254.35 (+4.74). Silver 16.87 (+0.143). Dollar lower. Euro lower. Stocks called mixed. U.S. 10-year 2.20% (unch).

Share
Posted in Markets |

Republicans punt: Obamacare replacement vote delayed

MarketWatch/Jeffry Bartash/06-27-17

Republican Senate leaders on Tuesday delayed a vote on the party’s controversial replacement for Obamacare until after July 4 amid a frantic effort to round up enough votes and avert an embarrassing defeat.

Senate Majority Leader Mitch McConnell had hoped to hold a vote before the holiday, but Republicans lack enough support for a bill that’s been criticized by both the moderate and conservative wings of the party.

PG View: That means that the balance of the President’s agenda is delayed as well. The stock market doesn’t like it . . .

Share
Posted in Politics |

How Fed’s Williams can say stock market’s on fumes while Yellen says another crisis won’t happen ‘this lifetime’


MarketWatch/Steve Goldstein/06-27-17

There’s a curious combination of messages that came from Federal Reserve officials on Tuesday.

Fed Chairwoman Janet Yellen told an audience in London that asset valuations are “somewhat rich.”

Fed Vice Chairman Stanley Fischer told an International Monetary Fund event that price-to-earnings ratios now stand in the top quintiles of their historical distributions.

And San Francisco Fed President John Williams gave the bluntest assessment, telling an Australian television station that the stock market is running on “fumes.”

PG View; Given the Fed’s history of overly-optimistic assessments, I think the real message is that the stock market is vulnerable to a sharp correction.

Share
Posted in Markets |