Monthly Archives: August 2017
US President Donald Trump has warned that “all options are on the table” after North Korea launched a missile over Japan early Tuesday.
The missile was fired just before 6 a.m. in Japan, where the launch set off warnings in the northern part of the country urging people to seek shelter.
“The world has received North Korea’s latest message loud and clear,” Trump said in a statement. “This regime has signaled its contempt for its neighbors, for all members of the United Nations, and for minimum standards of acceptable international behavior.”
Japanese Prime Minister Shinzo Abe also denounced Tuesday’s launch, saying it represented a “most serious and grave” threat.
Investors are pulling into safe haven assets after North Korea’s missile launch.
Gold climbed to its highest level this year earlier in the day, touching $1,326.08 per ounce.
The Japanese yen, Swiss franc, and US Treasurys are rallying Tuesday morning, as well.
…”North Korea’s provocations have added to fuel to the fire that was already burning,” Marc Chandler, the global head of currency strategy at Brown Brothers Harriman, said of the dollar.
Gold higher at 1323.58 (+5.96). Silver 17.61 (+0.129). Dollar lower. Euro higher. Stocks called lower. U.S. 10-year 2.09% (-6 bps).
Gold is up about $7 in overseas trading at $1325. Silver is up another 12¢ at $17.63 as metals’ strong performance yesterday carried over to trading in Asia and Europe. At this posting, DJIA futures are off 135 and the euro is trading at the $1.20 mark. Scroll for more. . . .
Gold gapped up in after hours trading driven by North Korea’s ballistic missile launch over Japan. Gold is up $26 at $1317 on the day. Silver is up 45¢ at $17.49. Gold had already registered a strong performance today on factors covered below.
If you are new to USAGOLD, our Gold Today! page is a good place to follow the gold price action in real-time. The page includes a constantly updating news feed with lots of news and opinion from solid sources in the U.S. and overseas.
Gold rallied to a 9-1/2-month high on Monday, breaching $1,300 per ounce as the dollar fell and the euro rose after the head of the European Central Bank (ECB) said that the euro zone’s economic recovery had taken hold at a meeting of central bankers.
At the meeting in Jackson Hole, Wyoming, the ECB’s Mario Draghi said the bank’s ultra-loose monetary policy was working and the euro zone’s economic recovery had taken hold, refraining from commenting on the euro’s recent strength.
That pushed the euro to its highest in more than 2-1/2 years against the U.S. dollar, while the dollar index fell to its lowest since May 2016.
“Draghi did not refer to the strong euro being a brake on policy normalization – this is what triggered the rally in the euro and the price reaction in gold mirrors what the currencies did,” Julius Baer analyst Carsten Menke said.
Gold has surged more than 12 percent this year, and Exante Data founder Jens Nordvig says there are three main macroeconomic trends that are behind the rally.
“I would say it’s the low-yield environment, the trend of the dollar and strong growth in emerging markets [that are driving gold],” he said Thursday on CNBC’s “Futures Now.”
“Those three things together are some of the things that have underpinned the gold rally, and they’re still here.”
Gold surged to new highs for the year, buoyed by a weak dollar and persistent political and geopolitical uncertainty. The definitive push above $1300 also spurred technical buying, as focus shifted to last year’s high at 1375.15.
The federal response to Hurricane Harvey adds another level of complexity and uncertainty to the impending budget and debt ceiling debates. Some are now saying that a government shutdown is more likely than not. If that is the case, a default becomes a very real possibility as well.
Many government officials, including the President, have vowed that the debt ceiling will be raised. However, it is hard to imagine that negotiation are going to be any less than extremely contentious.
When it comes to the budget, Democrats are likely to demand that not a dime gets appropriated for a border wall, forcing Republicans to choose between President Trump’s signature campaign promise and a shutdown. “If we have to close down our government, we’re building that wall,” pledged the President last week.
There is speculation that the GOP will make another swing at repealing and replacing Obamacare. That would further muddy the waters on the imperatives of the debt ceiling and the budget.
Congress returns from the long August recess on Tuesday, September 5. At that point, things will start getting really interesting. Is your portfolio sufficiently hedged?
President Donald Trump addresses supporters during a rally in Phoenix on Tuesday. Speaking of his plan to build a wall along the Mexican border, Trump said, “If we have to close down our government, we’re building that wall.”
At this point, it’s not really a surprise that a government shutdown is in the realm of possibility. Congress has faced the threat of one every fall for at least the past four years, since the government shut down in 2013 over Obamacare.
But this year, the threat is more serious, say budget experts, for one reason: President Donald Trump. He badly needs a legislative victory, and he flat-out said this week he would risk a shutdown to get funding for his hallmark campaign promise, a border wall.
Overlay Trump’s potential intransigence on a Republican Party that has long brought itself to the brink of a shutdown, and you have more factors leading to a shutdown than at any time since, well, the last one.
“It’s completely unpredictable,” said Maya MacGuineas, the president of the bipartisan Committee for a Responsible Budget. “A negotiation that one could have seen the outlines for the resolution just got a mini bomb tossed into it.”
PG View: The unpredictability bodes well for gold . . .
Gasoline futures soared Monday as Tropical Storm Harvey continued to wreak havoc on Texas, knocking major Gulf Coast refineries out of action.
And while the storm is also expected to curtail offshore crude oil production in the Gulf of Mexico, crude futures are under pressure. That’s because the supply impact is more than offset by the hit to demand for crude by the refinery shutdowns.
…“West Texas oil futures fell as the market expects that refineries will demand less oil as they take weeks, maybe longer, to come back on line,” said Phil Flynn, senior market analyst at Price Futures Group, in a note. “Brent crude on the other hand stayed stronger as the U.S. will demand product from Europe as well as some shut down of Libyan oil production over the weekend.”
Money managers kept adding to their net bullish positioning in gold as minutes of the most recent Federal Open Market Committee meeting suggested that U.S. monetary policymakers have a dovish mood, analysts said.
The weekly data compiled by the Commodity Futures Trading Commission show that the net-long, or bullish, position of money managers rose in both gold and silver futures for the week through the reporting cutoff date of Aug. 22.
…“Funds hold a sizable long in gold and are net long in silver as well,” said Sean Lusk, director of commercial hedging with Walsh Trading.
Gold futures pushed above the closely watched $1,300-an-ounce line in Monday trading as the still unfolding devastation—including the economic toll—from Hurricane Harvey pressured the dollar and stocks.
…The moves for gold and the greenback—which often trade inversely as changes in the U.S. unit‘s value can influence the attractiveness of gold to holders of other currencies—came on the heels of a speech by Federal Reserve Chairwoman Janet Yellen last week devoid of clues on the central bank’s near-term monetary policy intentions. Markets continue to put some odds on the chance for another rate hike yet this year but have pared back more aggressive policy expectations priced in earlier this year.
European Central Bank head Mario Draghi also showed restraint, and because he opted not to talk down the euro, it rose to a near 2 1/2-year high.
“Now that we know where both the Fed (dovish) and the ECB stands (tapering on the horizon), gold traders are going to focus on the momentum, which would primarily be driven by the dollar weakness,” said Naeem Aslam, chief market analyst with ThinkMarkets.
Gold jumped in overseas trading to pressure the important 1300.00 level once again. Mew highs for the year above 1300.98 would shift attention to the 1375.15 high from last year.
The yellow metal is being driven by a weak dollar, after Janet Yellen disappointed policy hawks on Friday by not addressing that topic specifically. That leaves the dovishness of the July FOMC minutes as the last official word on policy from the Fed.
Ms. Yellen also warned about excessive optimism and leverage in the market. Mario Draghi piled on with his own warnings about the threat of protectionism derailing the global economy.
With political and geopolitical risks mounting, look for safe-haven demand for gold to persist. Major support in the dollar index is close at hand at 91.92. If this level gives way, there is very little additional support for quite a ways. At that point, gold could really run.
Gold higher at 1298.72 (+7.51). Silver 17.25 (+0.191). Dollar lower. Euro higher. Stocks called higher. U.S. 10-year 2.17% (+1 bp).
Investors are fleeing U.S. stocks in a way they haven’t since 2004.
For 10 straight weeks a total of $30 billion has left U.S. stocks, marking the longest streak of outflows since 2004, Bank of America Merrill Lynch said in a Thursday report, citing EPFR Global data.
Investors turned instead to emerging markets and European and Japanese stocks, which saw $36 billion in inflows over the last 10 weeks, the report said.
PG View: Has the rush to the exit begun? Some of the money coming out of stocks is going into gold as well.
Gold prices settled Friday at their highest level since early June, buoyed by drop in the dollar to a three-week low.
The moves for gold and the greenback, which often trade inversely as moves in the U.S. unit can influence the attractiveness of gold to holders of other currencies, came on the heels of a speech by U.S. Federal Reserve Chairwoman Janet Yellen that didn’t offer clues on the central bank’s monetary policy investors hoped for.
In a much-anticipated speech at the Kansas City Federal Reserve Bank’s symposium in Jackson Hole, Wyo., Yellen steered clear from questions about current interest-rate policy. Investors also looked to a speech Friday from European Central Bank President Mario Draghi for hints as to when and how the bank will being to unwind its monetary easing.
…Following Yellen’s speech, the dollar weakened. The greenback, as measured by the ICE U.S. Dollar Index traded near its weakest level of 2017.
Early Friday, gold failed to gain traction from weak economic headlines that presumably would have boosted the metal as the data dulled prospects for higher interest rates. Orders for durable goods tumbled by the most that they had in nearly three years in July, although the volatile aircraft sector had a lot to do with that drop, masking brighter spots in the economy.
There is no denying gold is viewed as a safe-haven asset; the metal recently rallied on heightened uncertainty in the marketplace.
And, to one executive in the gold space, investors should look to get their hands on physical gold right now.
“Physical gold is motivated by people who want long-term protection, long term safety and security. They want to remove counterparty risk,” Josh Saul, CEO of London-based gold dealer The Pure Gold Company, said in a CNBC interview Friday.
After a disappointing few years for precious metals investors, gold is finally taking the lead.
With a 12.2 percent year-to-date rally for gold futures and a 9.3 percent year-to-date rise for the S&P 500, 2017 is set to be the first year in which the yellow metal has beaten stocks since 2011. In that year, gold advanced 10.2 percent while the S&P 500 finished flat.
This time around, traders are pinning gold’s advance on falling interest rates and a falling U.S. dollar. Both are typically good for gold, a non-yielding asset that is priced in dollars.
…”If you consider that we’re going to see some debt-ceiling drama, that actually is going to depress yields even more,” Sanchez said Thursday on CNBC’s “Power Lunch.” “And the weakness in the dollar is expected to continue into the next year. Both of those will support gold.”
European Central Bank President Mario Draghi said protectionist policies pose a “serious risk” for growth in the global economy.
At a gathering of central bankers, economists and others in Jackson Hole, Wyoming, on Friday, Draghi said the global economy is firming up. He told the audience in a speech that “a turn towards protectionism would pose a serious risk for continued productivity growth and potential growth in the global economy.”
The comments come at a time when President Donald Trump is taking a hard look at the U.S.’s trade agreements around the world, pushing to reduce trade deficits and make conditions more favorable for American manufacturers.
Gold turned rather volatile this morning, but earlier losses were quickly retraced after Janet Yellen began her speech in Jackson Hole. Amid persistent political and geopolitical tensions, along with a weaker dollar, the outlook for the yellow metal remains favorable.
Ahead of the Yellen speech at 9:41ET, a large sell order hit the futures market. Reportedly 2,868 contracts ($370M notional) were sold within one second. That knocked gold to a new low for the week at 1274.45. However, those losses were not sustained. As the Fed Chair began her speech. the yellow metal began retracing those losses and eventually re-approached the intraday high.
Yellen warned that memories of the last crisis “may be fading” and defended the regulatory reforms that came in the wake of that crisis. Reforms that the Trump administration is trying to walk-back.
Some analysts viewed the “passionate defense of the post-crisis regulation” as a swan-song of sorts. The suggestion being that it lessens the likelihood of her being reappointed when her term expires in February. In my opinion, it was a long-shot even before she made her speech today.
You have to think yellen's full-throated defense of fin reform in jax hole makes it less likely she'd be reappointed by prez trump.
— Steve Liesman (@steveliesman) August 25, 2017
Months after predicting we won’t see another financial crisis in our lifetimes, she no longer seems quite so sure:
CNBC’s Steve Liesman interpreted this segment of the speech as Yellen warning that another crisis is “inevitable and regulators should be prepared.”
The notion that there is an absence of credit and liquidity is lost on me. Total household debt recent hit a record high, with individual components of student debt and credit card debt at records. Corporate debt is at (or near, depending on the calculation) a record. And then of course the national debt is butted up against the debt ceiling. Less regulation is just going to mean more debt, but it all seems so inevitable anyway.
— Jim Rickards (@JamesGRickards) August 25, 2017
Given the ever-growing debt load is only sustainable as long as rates are low and the dollar is weak. But even that does not preclude another crisis. However, this shakes out, a well diversified portfolio with a physical gold component is the best way to ride-out the storm.
Next up: Mario Draghi.
Fed chair Janet Yellen pushed back against Trump’s agenda of financial deregulation — and it could cement her future
BusinessInsider/Pedro Nicolaci da Costa/08-25-17
Federal Reserve Chair Janet Yellen had a clear message for the Trump administration in what could be her final Jackson Hole speech: Undoing the hard work of reforming the financial system after the financial crisis could have dangerous consequences.
…In her keynote address at the high-profile conference in the Grand Teton mountains of Wyoming, Yellen was not holding back — in a way that potentially suggests she is not holding her breath for a reappointment from Donald Trump. Yellen’s term as Fed chair expires in February, and Trump is widely expected to nominate Gary Cohn, ex-president of Goldman Sachs and head of the president’s National Economic Council, to replace her.
“Fed Chair Janet Yellen’s passionate defence of the post-crisis tightening of financial regulation isn’t going to go down particularly well at the White House,” wrote Paul Ashworth, economist at Capital Economics, in a research note following the speech. “Donald Trump has made rolling back regulation the centre-piece of his presidency.”
Big sell order in futures takes gold down to 1274.45, but quickly rebounded into positive territory.
Gold is glittering again on Wall Street.
The yellow metal, which has a reputation as a safe place to park cash in turbulent times, is attracting increased buying interest from antsy investors as the record-setting stock rally stalls out, political risk in Washington grows and stocks approach September, which historically has been the S&P 500 stock index’s worst month.
Even though gold is up nearly 11% this year, which is better than the S&P 500’s 9% gain, Wall Street pros still think gold can be an effective hedge and offer protection to investors’ portfolios during what could be a turbulent September. The biggest driver of gold prices could be the uncertainty surrounding approaching deadlines for Congress related to the nation’s budget and raising of the debt ceiling.
Gold popped to 1294.57 after Dallas Fed’s Kaplan said central bank can afford to be patient on further rate hikes, closer to the neutral rate than some might think
Top White House and GOP leadership officials tell us the chances of a market-rattling government shutdown are rising by the day — and were even before Trump threatened at his raucous Phoenix rally on Tuesday night to use a shutdown as leverage to get funding for a border wall.
Trump is dead serious about this fight, a senior administration source tells Axios’ Jonathan Swan, and the president’s talk is starting to spook markets.
Goldman Sachs, in guidance to investors last Friday, pegged the odds at 50/50. This strikes us as high, but the dynamics are ominous:
A top Republican source put the chance as high as 75%: “The peculiar part is that almost everyone I talk to on the Hill agrees that it is more likely than not.”
This may all come down to Trump’s mood. As Swan puts it: “Trump is spoiling for a fight and the [conservative House] Freedom Caucus haven’t had a fight for a while. That’s a dangerous dynamic.”
Gold is narrowly confined awaiting news out of Jackson Hole. The bias remains to the upside in light of a myriad of political and geopolitical risks that are presently outweighing any economic optimism.
The market seems to want some indication from Yellen as to whether the Fed will force one more rate hike this year regardless of the current risks. The alternative is that the Fed decides the risks are too great, the likelihood of fiscal stimulus has evaporated and hence the tightening cycle is over.
Axios reported yesterday that a top Republican source put the chance of a government shutdown as high as 75%: “The peculiar part is that almost everyone I talk to on the Hill agrees that it is more likely than not.”
U.S. durable goods orders tumbled 6.8% in July, below expectations of -5.7%, versus negative revised +6.4% in June. Aside from the Janet Yellen and Mario Draghi speeches, that’s it on the calendar today.
Yellen’s speech begins at 10:00ET, followed by Draghi at 3:00ET.