Monthly Archives: September 2017

S&P 500 Vs. Gold: Bloomberg Intelligence Weighs In On The Battle


KitcoNews/Sarah Benali/09-29-17

Gold and the S&P 500 are currently in a tight race.

For Bloomberg Intelligence analyst Mike McGlone, this translates into good news for the yellow metal.

“Running neck and neck with the S&P 500 in a tightening cycle should favor gold in most scenarios,” the commodities strategist wrote in a report released Friday.

… “With the record-setting stock market barely beating gold, the metal may be worthy of greater attention,” he said.

“Despite all of the attention on stocks, gold may be looking ahead to a more favorable endgame at a steep discount to historical highs with inflation brewing, a potential dollar peak and the lowest CBOE Volatility Index ever.

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Posted in Gold News, Gold Price, Gold Views, Markets |

How gold takes the shine off Britain’s trade figures

SkyNews/Ed Conway/09-29-17

Doubt has been cast over one of the longest-standing economic claims in the Brexit debate after a Sky investigation revealed that Britain’s real exports to outside the EU are actually far lower than official figures suggest.

…this number is severely distorted by the flow of gold bullion in and out of London – the world’s major centre for the trade of this precious metal.

…In July alone, the latest month for which trade figures exist, gold accounted for more than a tenth of the value of everything exported by the UK overseas – making it Britain’s top export above cars, engines and pharmaceuticals.

Since the vast majority of this gold is shipped to non-EU countries such as China, Switzerland and India, the upshot of these gold figures is to swell the total amount of goods reported as being shipped outside Europe.

PG View: And it’s worth noting that much of the gold exported to Switzerland is being re-refined into kilo bars and then being sent on to . . . you guessed it, China and India . . .

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Posted in Gold News, Gold Views |

The Daily Market Report: Gold is Defensive Heading into Month-End/Quarter-End, but Trend Remains Positive


USAGOLD/Peter Grant/09-29-17

Gold heads into the weekend, month-end and quarter-end on a defensive footing. In light of the last three-weeks of downticks, some short-covering could be seen ahead of today’s close.

The latest inflation data draws attention back to Janet Yellen’s speech earlier this week, where she acknowledged that she and her colleagues may have misjudged the fundamental forces driving inflation. With core PCE falling to a 2-year low in August, investors should heed the following line from that speech:

“… achieving our 2 percent inflation goal over the medium term may require a more accommodative stance of monetary policy than might otherwise be appropriate.” — Janet Yellen

Perhaps not surprisingly, December rate hike expectations have been further tempered to 73.9%, from more than 80% midweek. So the question becomes, is the Fed abandoning the 2% inflation target? If they are, they may very well hike rates before year-end. If on the other hand they remain committed to a higher level of inflation, further tightening policy — via balance sheet normalization and/or rate hikes — is the absolute wrong prescription.

The ECB is facing the same conundrum. With European inflation just 1.5% y/y in September, they have to decide whether to start tapering asset purchases ahead of year-end. “October’s meeting is likely to be one of the greatest balancing acts in the ECB’s history,” wrote analysts at ING according to the FT.

No central bank has more experience with ZIRP and QE than the BoJ. They’ve been at it for nearly two-decades and have the massive balance ¥514 trillion to prove it. The latest nationwide core CPI reading was 0.7% y/y in September.

At this point, I would think the cumulative brain-trust of central bankers would be able to conclude that their policies to specifically boost inflation have been an abject failure. I get that they can’t really admit that, although Yellen came pretty darn close this week.

If that’s the true motivation for initiating measures to normalize the balance sheets, that would at least make sense. However, I fear that such measures are going to tip the economy into recession.

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

Spain heads for showdown over Catalan independence referendum

AFP, via TheLocalSpain/Michaela Cancela-Kieffer/09-29-17

Spain is on tenterhooks as the crisis between Catalan separatist leaders and the central government reaches fever-pitch ahead of an independence referendum banned by Madrid on Sunday.

The showdown is one of Spain’s biggest political crises since the end of the dictatorship of Francisco Franco four decades ago and it has Catalonia deeply divided.

…Determined to block the illegal vote, the state has deployed thousands of police to Catalonia, some of them housed in ferries in the ports of Barcelona and Tarragona.

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Posted in Geopolitical Risks |

Lower than expected inflation sets scene for ECB balancing act

FY/Laura Noonan/09-29-17

Eurozone inflation rose at an annual rate of 1.5 per cent cent in September, missing economists’ forecasts and leaving the ECB with a dilemma as it weighs whether the economy is strong enough for it to roll back its bond-buying programme.

PG View: I’m sure, here too this is transitory. But keep in mind, weak inflation has been “transitory” for nearly two-decades in Japan, despite massive monetary accommodations.

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Posted in Central Banks, ECB, inflation |

UK economy worse than thought after data revisions

FT/Chris Giles/09-29-17

Broad revisions to Britain’s main statistics on Friday showed the economy has performed worse than previously thought since the Brexit vote, although household finances are significantly stronger.

Year-on-year growth in the second quarter was revised down from 1.7 per cent to 1.5 per cent, the Office for National Statistics said, with slower growth than previously recorded in the last three quarters of 2016.

…Consumer debt continued to rise at a near double-digit pace in August, increasing 9.8 per cent from a year earlier, adding to the Bank of England’s fears that there is a “pocket of risk” in lending on credit cards and car finance.

PG View: So, does the BoE still hike rates in Nov as Carney has suggested?

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Posted in Economy |

Trump Meets With Kevin Warsh About Fed Chairman Job

WSJ/Michael C. Bender/09-29-17

President Donald Trump and Treasury Secretary Steven Mnuchin met with former Federal Reserve governor Kevin Warsh on Thursday to discuss his potential nomination as the next Fed chairman, a White House official said, signaling that the West Wing is moving ahead with a process that the president has said he would like to have completed by the end of the year.

PG View: Warsh was a Fed governor from 2006 to 2011 and was generally opposed to über-accommodative monetary policy, although not to the point of dissent. He is being broadly panned as too cautious, but it may be that the risks he warned about have yet to manifest . . .

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Posted in Central Banks, Fed |

Cracks in Dollar Are Getting Larger


Daily Reckoning/Jim Rickards/09-27-17

The world is losing confidence in the dollar again. China just announced that any oil-exporter that accepts yuan for oil can convert the oil to gold on the Shanghai Gold Exchange and hedge the hard currency value of the gold on the Shanghai Futures Exchange.

…This marks the beginning of the end of the petrodollar system that Henry Kissinger worked out with Saudi Arabia in 1974, after Nixon abandoned gold.

Of course, leading reserve currencies do die — but not necessarily overnight. The process can persist over many years.

…eventually a tipping point will be reached where the dollar collapse suddenly accelerates as happened to sterling in 1931. Investors should acquire gold and other hard assets before that happens.

PG View: The price of gold in dollars has risen more than 3,600% since Nixon closed the gold window in 1971. As the dollar continues its “long, slow process of marginalization,” the secular bull trend in gold will continue as well. The time to move some of your savings out of dollars and into gold is now.

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Posted in U.S. Dollar |

Chicago PMI jumped to 65.2 in Sep, above expectations of 58.5, vs 58.9 in Aug.

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Posted in Economic Data |

Gold Prices Hold Support Again


KitcoNews/Todd ‘Bubba’ Horwitz/09-29-17

After making a low at $1,204 in July, gold has been in a nice uptrend, trading as high as $1,362. In the last 15 to 20 days, gold has been in a minor downtrend; however, support has held on every sell-off. On Thursday gold was tested, trading down to $1,280 only to bounce back and hold that major support level.

The action in gold suggests that the uptrend will continue. There will be attempts to sell, but the big picture looks like support should be bought. The gold trade is consistent with a market changing from the five-year bear market into a new bull market.

“[G]old looks great and is on schedule to test $1,400.” — Todd ‘Bubba’ Horwitz
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Posted in Gold News, Gold Price, Gold Views |

Morning Snapshot: Gold firms as core PCE inflation hits 2-year low

USAGOLD/Peter Grant/09-29-17

Gold is modestly firmer as the dollar continues to retrace recent gains. In the wake of yesterday’s simple hook reversal (lower low, higher close), some upside follow through would be expected as shorts take profits ahead of the weekend.

U.S. personal income rose +0.2% in August in line with expectations, tempering optimism that sprang from the +0.4% print in July. PCE rose 0.1%, also in line with expectations. Core PCE — the Fed’s favored measure of inflation — fell to 1.29% y/y, a two-year low.

The PCE data further erodes the weak inflation is “transitory” meme, bolstering Janet Yellen’s self-assessment that she and her colleagues may have “misjudged” on inflation. Today’s data should temper December rate hike expectations, helping gold.

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Posted in Gold News, Gold Price, Gold Views, Snapshot |

U.S. personal income +0.2% in Aug, in line with expectations, vs +0.4% in Jul. PCE +0.1%, in line with expectations, vs +0.3% in Jul.

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Posted in Economic Data |

Gold steady at 1288.87 (+1.64). Silver 16.86 (-0.035). Dollar lower. Euro higher. Stocks called mixed. U.S. 10-year 2.30% (-1 bp).

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Posted in Gold Price, Markets |

Gold lifts itself from the canvas today, posts a gain

LATE REPORT

Gold lifted itself from the canvas today settling $5 higher at $1287.00 and up $10.50 from its intra-day bottom at $1276.50.  Silver was 4¢ higher at $12.83. Gold has spent most of September tracking to the downside from its $1356 high for the year posted at the beginning of the month.

More proof of professional investors buying the dip surfaced today when Lipper, the fund research firm, reported that precious metals commodity funds took in $977 million over the past week, their highest level of capital investment since July, 2016.  Gold ETFs also reflect investors buying on the correction. By contrast, Lipper reported, stock mutual funds and ETFs suffered almost $10 billion in withdrawals.

Quote of the Day
“In an interview with Bloomberg, [World Gold Council’s Randall] Oliphant cited global political risks as impacting supply, yet countered that robust purchases from India and China should keep demand high. This, in his view, should push prices to as high as $1,400 an ounce in the near term and to record highs in the medium term. For context, gold peaked at an intraday high of just over $1,927 an ounce back in September 2011, and I would presume the “medium term” suggests a price target within the next two to five years, although Oliphant didn’t specify.”


News & Views – Forecasts, Commentary & Analysis on the Economy and Precious Metals
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We invite you to sign-up for our free newsletter available with appreciation to our current and prospective clientele. Immediate access to the September issue.  Access to the October issue will arrive by e-mail early next week.  It covers some interesting terrain.


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Gold settles modestly higher after touching lowest levels since mid-August

MarketWatch/Myra P. Saefong/09-28-17

Gold prices end higher Thursday, edging up after notching a six-week low as the U.S. dollar retreated from its highest level in a month. “Futures and options traders may be running scared of the [Federal Reserve’s] sudden claim of getting sober and preparing to raise rates, but private investors in physical gold don’t believe it,” said Adrian Ash, head of research at BullionVault. “They’re using this price drop to rebuild positions after taking profits over the summer,” he said.

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Posted in Gold News, Gold Price, Gold Views |

The world’s largest hedge fund told clients the Fed is making a mistake


BusinessInsider/Rachael Levy/09-28-17

“The Fed is basing its moves on classic cyclical indicators and the desire to ‘normalize’ the balance sheet,” Bridgewater Associates told clients in a private note, which was seen by Business Insider. “Based on the calculations that we do, we doubt that the Fed will be able to execute its plan without causing problems.”

Reason 1 (of 5): “There is not nearly enough inflation and overheating risk to make concerns about inflation and overheating of paramount importance.”

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Posted in Central Banks, Fed, inflation, Monetary Policy, QE |

Outside the Box Low Inflation Is No “Mystery”

Mauldin Economics/John Mauldin/09-27-17

When is a mystery not a mystery? When Janet Yellen is puzzling over a lack of inflation, that’s when. So say Brian Wesbury, chief economist, and Robert Stein, deputy chief economist of First Trust, in today’s Outside the Box. The bottom line: QE didn’t work, and Janet knew it was unlikely to work, from the start.

…So forgive us for asking, but after unprecedented expansion of banking reserves and the Fed balance sheet, with little inflation, is it really a “mystery?” Or, is it proof of what we believed all along: QE didn’t work?

…instead of boosting Milton Friedman’s key money number (M2), the excess monetary base growth went into “excess reserves” – money the banks hold as deposits, but don’t lend out. Money in the warehouse (or in this case, credits on a computer) doesn’t boost demand! This is why real GDP and inflation (nominal GDP) never accelerated in line with monetary base growth.

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Posted in BoE, BoJ, Central Banks, ECB, Fed, inflation, Monetary Policy, QE |

The Daily Market Report: Gold Stabilizes Above 5-Week Lows


USAGOLD/Peter Grant/09-28-17

Gold is trading modestly higher after dipping to new 5-week lows in overseas trading. The yellow metal has caught a bit of a bid as the dollar retreats from its recent 6-week high and December rate hike expectations edge lower.

Fed funds futures now show December rate hike probability of 76%, down from 81% yesterday. Nonetheless, FedSpeak today continues to tow the ‘gradual rate hikes are appropriate’ party line.

Stanley Fischer, on his way out the door essentially, said the importance of reversing temporary policy stimulus measures should not be “underestimated.” Realize that those “temporary” measures have been ongoing for about a decade. Rates will remain well below what was previously considered normal and the balance sheet will remain massive for some time to come, even if the normalization goes off exactly as planned.

Maybe investors are re-reading Janet Yellen’s speech from earlier in the week and realizing it’s not as hawkish as their initial interpretation. Yellen admits that her and her colleagues may have been “misjudged” the labor market and inflation. One traders said it was an admission that the Fed is clueless!

In the very same speech, she said that gradual rate hikes remains appropriate, but also said “achieving our 2 percent inflation goal over the medium term may require a more accommodative stance of monetary policy.” Which is it? Because it can’t be both . . .

“QE didn’t work, and Janet knew it was unlikely to work, from the start,” said John Mauldin in his introduction to an article entitled Low Inflation Is No “Mystery”

So forgive us for asking, but after unprecedented expansion of banking reserves and the Fed balance sheet, with little inflation, is it really a “mystery?” Or, is it proof of what we believed all along: QE didn’t work? — Brian S. Wesbury & Robert Stein of First Trust

It seems to me that forging down the same policy path that has failed to yield the desired results is ill-advised. That goes for the start of QE and it will likely to be true for the unwind of QE as well. Damned if you do and damned if you don’t.

Geopolitical tensions seem to have eased somewhat as China ramped-up pressure on North Korea. All North Korean firms and joint ventures in China must close within the next several months.

With even their closest ally aligning with the U.S. and dialing up the santions, the hope is that the DPRK will back down. Whether they do or not, remains to be seen and South Korea is still expecting more missile tests and perhaps another nuclear test in October.

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

Trump tax plan pushes gold to 6-week low

Reuters/Peter Hobson/09-28-17

Gold touched its lowest in six weeks on Thursday after the dollar and U.S. bond yields rose on proposed U.S. tax reforms and strong economic data that supported the case for another U.S. interest rate hike this year.

U.S. stocks rose and the dollar touched its highest level since mid-August before slipping as markets bet President Donald Trump’s tax-cutting plan could accelerate economic growth.

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Posted in Gold News, Gold Price, Gold Views |

All North Korean firms and joint ventures in China to be closed

South China Morning Post/Liu Zhen & Kristin Huang/09-28-17

China announced on Thursday that all North Korean firms and joint ventures in China would be closed, as part of the latest sanctions imposed on Pyongyang over its nuclear weapons programme.

All existing joint ventures with North Korean firms in China, as well as entities solely owned by North Korean companies or individuals, are to be closed within 120 days from September 11, when the sanctions were adopted, a notice from the Ministry of Commerce said.

Joint ventures set up overseas by Chinese firms and North Korean entities or individuals should also be closed, it said.

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Posted in Geopolitical Risks, North Korea |

Morning Snapshot: Gold stabilizes, but remains defensive

USAGOLD/Peter Grant/09-28-17

Gold extended to the downside in overseas trading before stabilizing near unchanged. The dollar has eased somewhat after eking out a 6-week high in earlier trading, helping to buoy gold.

U.S. Q2 GDP (3rd report) was revised up to 3.1%, in line with expectations, versus 3.0% previously and 1.2% in Q1. The U.S. advanced goods trade gap narrowed to -$62.9 bln in August. U.S. initial jobless claims rose 12k to 272k last week, above expectations of 268k.

Later this morning we’ll get August agriculture prices and M2 for the week ended 18-Sep. FedSpeak is due from George, Fischer and Bostic.

China has ordered that all North Korea connected business be shut down within 120-days. This forceful move by the DPKR’s closest ally may move the ball on a diplomatic solution. However, more provocative actions by North Korea are still anticipated, which is an underpinning of the gold market.

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Posted in Gold News, Gold Price, Gold Views, Snapshot |

U.S. Q2 GDP (3rd report) revised up to 3.1%, in line with expectations, vs 3.0% previously, and 1.2% in Q1.

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Posted in Economic Data |

U.S. advanced goods trade gap narrowed to -$62.9 bln in Aug, inside expectations of -$65.1 bln, vs revised -$63.9 bln in Jul.

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Posted in Economic Data |

U.S. initial jobless claims +12k to 272k in the week ended 23-Sep, above expectations of 268k.

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Posted in Economic Data |

Gold better at 1285.58 (+1.88). Silver 16.83 (+0.038). Dollar lower. Euro higher. Stocks called lower. U.S. 10-year 2.33% (+2 bps).

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Posted in Gold Price, Markets |

Gold continued its downtrend today

LATE REPORT

Gold continued its downtrend today shedding another $11.34 and finishing at $1282.61.  Silver held its own losing only 4¢ and finishing the day at $16.73.  Both metals are trading quietly early in Asian markets.  Both yesterday and today, gold spiked lower at precisely midnight ET.  The Japanese yen and Chinese yuan both chased gold lower oddly at the exact same time.  The whole move had the look of structured trading, but there is no way to verify the cause of the triple declines, i.e., the yen, the yuan and gold. Scroll down for a chart depicting the event, and we will leave it to you  to make your own call. . . . .

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“[Y]ou can’t afford to try to time the market. What you have to do is study the long term elements, and you have to have a diversification plan that protects you when you’re wrong.” – Tony Robbins


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Gold marks fresh September low as dollar gains

MarketWatch/Myra P. Saefong & Rachel Koning Beals/09-27-17

Gold fell for a second session Wednesday as stocks and the dollar moved higher and traders watched the rollout of a Republican plan to overhaul the U.S. tax code.

PG View: Stocks love the proposed corporate tax cut, whetting risk appetite. However, whether or not the GOP can move the ball on this remains to be seen.

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Posted in Gold News, Gold Price, Gold Views |

Trump says GOP tax reform plan will create ‘revolutionary change’

CNBC/Christina Wilkie/09-27-17

President Donald Trump on Wednesday promised that his newly released tax reform plan would deliver American businesses some of the lowest tax rates in nearly a century, and do so with bipartisan support in Congress.

…A proposed 20 percent corporate tax rate, Trump said, would put U.S. business tax rates below the average of other industrialized nations, which the president called “a revolutionary change.”

…Most Democrats said they won’t support tax cuts for the wealthiest Americans and won’t vote for an overhaul that adds to the deficit.

PG View: Unveiling the plan is the easy part, getting something through Congress is another story entirely.

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Posted in Politics |

The Daily Market Report: Gold Pressured as Market Adjusts to Rate Hike Expectations


USAGOLD/Peter Grant/09-27-17

Gold extended to the downside in early, establishing new 5-week lows as the dollar continued to rebound amid heightened rate hike expectations for December. The yellow metal subsequently garnered some support after more disappointing housing market data.

U.S. NAR pending home sales sank 2.6% in August. Low supplies have sapped momentum from the market and the NAR’s chief economist concedes that the the housing market has essentially stalled. Housing makes up nearly a fifth of GDP, but drives an even larger segment of consumption (think furniture, appliances, law care products etc.).

If Janet Yellen really believes gradual rate hikes are still appropriate, think about the implications for the already slowing housing market. Higher mortgage rates, higher carry rates on construction and bridges loans are unlikely to reinvigorate this critical segment of the economy. Such policy is also unlikely to stoke the inflation that the Fed so desperately wants.

Currently the market believes the odds for a December rate hike are about 80%, based on Yellen’s comments yesterday. However, the Fed is still very much data dependent and I imagine the probability will be pared in the weeks ahead if incoming data disappoint.

If that is indeed how things unfold, the dominant downtrend in the dollar should re-exert itself, providing support for gold in the process. Certainly any escalation of the tensions with North Korea will provide an underpinning for the yellow metal as well.

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

U.S. NAR pending home sales index -2.6% to 106.3 in Aug, vs 109.1 in Jul.

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Posted in Economic Data |