Monthly Archives: September 2017

King Dollar Dethroned From Safe-Haven Perch in Carry-Trade Shift


Bloomberg/Sid Verma/09-27-17

The euro and the yen have quietly usurped the dollar as the world’s favorite haven, according to Bank of America Corp. strategists.

…”The dollar no longer displays dominant ‘safe-haven’ behavior unless the risk-off is driven by China or Korea concerns,” Sinha and his colleagues in Hong Kong and London wrote.

Foreign-exchange havens including gold outperformed the dollar on a volatility-adjusted basis when the bank’s Global Financial Stress Index showed market dislocations over the past three years.

PG View: This is part-and-parcel of the more broad ongoing erosion of the dollar as the global reserve currency.

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Posted in U.S. Dollar |

Attacks on gold past two days. . .

OPINION

. . . began at 10:00 pm Mountain Time both days with both the yen and gold dropping significantly, as shown in the first chart, a yen/gold overlay. Keep in mind that the yen is quoted in yen per dollar – a rising trend line coincides with a drop in the yen’s value against the dollar.  This looks like algo-based program trading, or some other planned intervention, designed to bring about an intended result. It is occurring long after the COMEX close and well before its open and during Tokyo trading hours while the TOCOM is open.

The second chart on the Chinese yuan shows a similar predisposition.  Keep in mind that China recently gave tacit permission to offshore traders to short the yuan. (Wall Street Journal article “China Acts to Cool Resurgent Yuan” – 9/11/2017) Once again, the yuan is quoted yuan/dollar so the chart appears inverse. In both instances, yesterday and today, the yuan was appreciating at 22:00 then suddenly turned around.   – MK

 

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Gold edges down as dollar gains on Fed rate hike view

Reuters/Nithin ThomasPrasad/09-27-17

Gold inched lower on Wednesday, weighed down by a stronger dollar amid prospects for a December interest rate hike in the United States and ahead of the unveiling of a tax plan by Donald Trump’s administration.

…In the previous session, prices fell 1.3 percent in their biggest loss in over two weeks following comments by U.S. Federal Reserve Chair Janet Yellen that the central bank needed to continue gradual rate hikes despite broad uncertainty about the path of inflation

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Posted in Gold News, Gold Price, Gold Views |

Morning Snapshot: Gold remains under pressure as yields, dollar rise

USAGOLD/Peter Grant/09-27-17

Gold remains defensive in the face of a rising dollar and the rising belief that the Fed will hike rates in December, regardless of weak inflation and growth risks. The yellow metal is slipped to new 4-week lows below 1287.50.

Fed Chair Yellen said yesterday that gradual rate hikes remain appropriate, despite misjudgements on the labor market and inflation. While she opened the door for a possible reversal of course, the market ignored that and prospects for a December rate hike jumped. Yields and the dollar rose as well, putting gold under pressure.

Todd ‘Bubba’ Horwitz, writing for KitcoNews, contends that Yellen essentially admitted that the Fed is “clueless”.

The real story is simple — all markets are on edge and looking to make big moves in one direction or the other. Looking into my crystal ball, I would expect equities, bonds, the euro currency and oil to break to the downside while gold, the U.S. dollar and commodities go higher. — Todd ‘Bubba’ Horwitz

U.S. durable goods order rebounded more than expected in August, although the overall trend remains troubling. The August pending home sales index and EIA crude data for last week are out later this morning. We’ll also hear FedSpeak from Bullard, Brainard and Rosengren.

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

U.S. durable goods +1.7% in Aug, above expectations of 1.0%, vs -6.8% in Jul; +0.2% ex-trans.

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Posted in Economic Data |

Gold lower at 1288.82 (-4.60). Silver 16.85 (-0.007). Dollar higher. Euro lower. Stocks called mixed. U.S. 10-year 2.29% (+5 bps).

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Posted in Gold Price, Markets |

Gold surrenders yesterday’s gains

LATE REPORT

Gold surrendered today most of the gains it picked-up yesterday and more. It was down $16.50 on the day at $1293.95.  Silver was down 38¢ at $16.77.  In early Asia trading, both metals are trading sideways to up marginally.  Gold’s decline began in the overnight market and continued steadily through the day. The main culprit could simply be ordinary profit taking and re-positioning at the higher prices.

Quote of the day
“Even those of us who have been tracking gold’s progress for decades frequently give in to the ease of quoting gold’s value in terms of fiat currency – most commonly in US dollars. And yet, we have it the wrong way round. Gold is in fact the centre of the economic universe, and all the fiat currencies (including cryptocurrencies) revolve around gold.” – Jeff Thomas, International Man.com


If you are a chart enthusiast, we have a couple pages at the USAGOLD website worth bookmarking. These charts are presented in conjunction with the St. Louis Federal Reserve (FRED) and update automatically through the magic of the internet. Both pages are handy references used often to settle after-dinner disputes among family members about the direction of the economy. [smile]

Gold trends and indicators in chart form

Monetary trends and indicators in chart form


 

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Fed’s Yellen says gradual hikes should continue, despite weak inflation

Reuters/Howard Schneider & Ann Saphir/09-26-17

The Federal Reserve needs to continue gradual rate hikes despite broad uncertainty about the path of inflation, Fed Chair Janet Yellen said on Tuesday in remarks that acknowledged the central bank’s struggles to forecast one of its key policy objectives.

It is possible, Yellen said, that the Fed may have “misspecified” its models for inflation, and “misjudged” key facts like the underlying strength of the labor market and whether inflation expectations are as stable as they seem.

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Posted in Central Banks, Fed, Monetary Policy |

The Daily Market Report: Gold Turns Choppy as Yellen Speaks


USAGOLD/Peter Grant/09-26-17

Gold retreated back below $1300 as Janet Yellen spoke on “Inflation, Uncertainty, and Monetary Policy” before the NABE in Cleveland. However, losses stalled well shy of Friday’s low at 1287.50, before prices began to recover.

Ms. Yellen reiterated that gradual tightening of monetary policy was appropriate, despite persistent weakness in inflation. However, she acknowledged that “My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation.”

Yellen went on to say that there could be a course correction to “a policy path that is somewhat easier than that now anticipated.” Nonetheless, the market at least initially interpreted her comments as being hawkish.

“… 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

The Fed has been trying to manufacture 2% inflation for five years now. Clearly there is something going on that can not be addressed by their standard policy options. Tighter policy is certainly not going to get them there.

The probability of a December rate hike jumped to 81%, pulling the dollar higher. That put additional pressure on gold, but it seems like this speech actually opens the door for a reversal in the policy course, more-so than anything we’ve heard recently. That would make this dip in gold a buying opportunity.

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

Yellen says Fed may have been wrong on employment and inflation, which would mean easier policy ahead

CNBC/Jeff Cox/09-26-17

The Federal Reserve may have overstated the strength of the labor market and the rate of inflation, leading to monetary policy ahead that will be easier than previously thought, Fed Chair Janet Yellen said Tuesday.

…The result would be an even more dovish Fed when it comes to removing the historically aggressive policy accommodation in place since the financial crisis.

“My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation,” Yellen said, according to prepared remarks.

PG View: While the market seems to have latched on to the reiteration that gradual rate hikes are appropriate, the acknowledgement that the Fed might be wrong seems pretty dovish in actuality.

“…if longer-run inflation expectations are running at levels consistent with longer-run PCE price inflation somewhat below 2 percent, the FOMC can still achieve its inflation goal. Under those conditions, continuing to revise our assessments in response to incoming data would naturally result in a policy path that is somewhat easier than that now anticipated–an appropriate course correction that would reflect our commitment to maximum employment and price stability. — Janet Yellen
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Posted in Central Banks, Fed, inflation, Monetary Policy |

Gold falls as Yellen reiterates that gradual tightening is appropriate.

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Posted in Central Banks, Fed, Gold News, Gold Price, Monetary Policy |

We’re Reaching Peak Gold


Bloomberg/Danielle Bochove/09-25-17

The world may have already produced the most gold in a year it ever will, according to the chairman of the World Gold Council.

Production is likely to plateau at best, before slowly declining as demand rises, especially given global political risks and robust purchases by consumers in India and China, Randall Oliphant said in an interview Monday.

…Prices could climb to as high as $1,400 an ounce in the next 12 months, and top record highs in the “medium term,” Oliphant said at the Denver Gold Forum…

“…it’s really hard to see how we’re going to produce enough gold to meet all this demand.” — Randall Oliphant
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Posted in Gold News, Gold Price, Gold Views |

U.S. consumer confidence fell to 119.8 in Sep, below expectations of 120.0, vs negative revised 120.4 in Aug.

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Posted in Economic Data |

U.S. new home sales -3.4% to 560k in Aug, below expectations of 585k, vs positive revised 580k in Jul.

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Posted in Economic Data |

U.S. Richmond Fed index rose to 19 in Sep, vs 14 in Aug.

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Posted in Economic Data |

U.S. Case-Shiller home price index for 20-cities +0.7% (nsa) in Jul; +5.81% y/y.

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Posted in Economic Data |

Gold slips on profit-taking but North Korea tensions persist

Reuters/Zandi Shabalala/09-26-17

Gold eased under pressure from the dollar on Tuesday with investors booking profits after rising tensions between North Korea and United States pushed the metal to a one-week high.

…”Geopolitics haven’t come off the table. They are still front and centre but after a rally you tend to get a tiny bit of a pullback,” said ETF Securities commodity strategist Nitesh Shah.

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Posted in Gold News, Gold Price, Gold Views |

Morning Snapshot: Gold probes back below $1300 as dollar gains

USAGOLD/Peter Grant/09-26-17

Gold has retraced some of yesterday’s North Korea inspired gains, ticking back below $1300. The dollar index is testing 3-week highs, putting additional pressure on the yellow metal.

While markets seem increasingly inclined to quickly shrug-off the bellicose rhetoric and aggressive provocations from both North Korea and the U.S., the threat of an accidental conflict is very real. “The North Koreans assume that the threats will be enough to restrain US action but the US might be thinking the same thing, so you end up in a situation where a provocation from one side is seen by the other as an actual move towards war,” said Rodger Baker of Stratfor.

Today’s U.S. calendar has the Case-Shiller home price index for July, new home sales for August, consumer confidence for September and the Richmond Fed index. We’ll also hear FedSpeak from Brainard and Bostic. Janet Yellen will speak on “Inflation, Uncertainty, and Monetary Policy” this afternoon in Cleveland. That should be interesting . . .

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

Gold lower at 1301.61 (-7.17). Silver 17.00 (-0.157). Dollar higher. Euro lower. Stocks called mixed. U.S. 10-year 2.22% (unch).

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Posted in Gold Price, Markets |

Gold vaults higher, up $13.50 – 1.5% on the day

LATE REPORT

Gold vaulted higher at today’s open and stayed at elevated levels throughout the day.  The precious metal was up almost $13.50 (+1.5%) on the day at $1310.53.  Silver followed suit up 18¢ (+1.7%) on the day at $17.15.  The strong, sudden spike at the open coincided with remarks from North Korea’s foreign minister Ho that the “United States declared war on our country.” Both metals are up marginally in Asia as this report is posted.

Here’s what today’s action looks like on a chart.  Both metals are represented:

For greater detail, please scroll below. . . .

Quote of the day
“Well, first of all, the best way to structure a portfolio is to have the right kind of balance in your portfolio, and some amount of gold. Gold serves a purpose. It is first of all, a diversifier against other assets. You know, we have this risk on, risk off thing. We also have a monetary system. The Bretton Woods monetary system began after World War II, and it had the dollar as the world’s reserve currency. There’s a risk there. There’s a lot of dollar denominated debt and so on. If somebody felt they didn’t want to hold that, and so you could have exposures to that.” – Ray Dalio, Bridgewater Associates [9/22/2017]


If you are new to the USAGOLD website, we invite you to kick back and stay awhile. Do a little interest-driven browsing. We launched this website in 1997 and it has dutifully been providing guidance and market information to investors ever since.

One of the most highly referenced and visited web portals in the gold business, this website goes deep. People are often surprised just how deep it goes. As a launchpad, we offer a quick website tour that hits the high points and suggests links, but it’s the depth, practicality and ease of use that will keep you coming back. WELCOME!


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Gold prices finish at a more than one-week high

MarketWatch/Myra P. Saefong/09-25-17

Gold prices settled at their highest level in more than a week Monday, as growing tensions between the U.S. and North Korea and declines in the U.S. stock market lifted the metal’s appeal as a safe-haven investment. December gold rose $14, or 1.1%, to settle at $1,311.50 an ounce. That was the highest finish since Sept. 15, according to FactSet data.

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Posted in Gold News, Gold Price, Gold Views |

German bond yields slip as surprise election highlights threat to eurozone


MarketWatch/Sunny Oh/09-25-17

German government bonds rallied on Monday after the German election showcased a surprising rise in support for an anti-immigrant party, highlighting waning support for the regions most established parties and reigniting fresh worries that the ascendance of anti-establishment factions would threaten the solidarity of Europe’s trading bloc.

The anti-immigration Alternative für Deutschland, or AfD, also known as Alternative for Germany, won 13% of the vote on Sunday, making them the third-largest political faction in parliament.

…Market participants believe that the German election may only be the first domino in a lineup of more substantial threats to the integrity of the eurozone. Catalonia, a province of Spain, plans to declare a referendum for its independence on Oct. 1 . . .

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Posted in Politics |

Gold companies take a shine to China’s Silk Road

Reuters/Tom Daly/09-24-17

As far as China’s miners are concerned, the modern-day Silk Road is paved with gold.

Buoyed by a 15 percent rise in the gold price this year, Chinese mining executives in Tianjin this weekend were talking up their ambitions for overseas expansion.

PG View: China continues to expand its control over the physical gold market, from both the supply and demand sides.

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Posted in Gold News, Gold Views |

The Daily Market Report: Gold Jumps Back Above $1300


USAGOLD/Peter Grant/09-25-17

Gold rebounded smartly back above the $1300 level in early New York trading, after North Korea accused the U.S. of declaring war on them. The yen and bonds rose and stocks fell as investors rotated back to a risk-off footing.

“Since the United States declared war on our country, we will have every right to make countermeasures, including the right to shoot down United States strategic bombers even when they are not inside the airspace border of our country,” said DPRK Foreign Minister Ri Yong Ho. So while the situation was deemed to have calmed over the weekend, it seems such periods are destined to be short-lived.

Gold had been defensive since last week’s Fed policy decision lifted prospects for one more rate hike before year end. With inflation still tepid and Q3 GDP expectations ratcheting lower, I continue to have my doubts.

If we are to believe the Fed paused in September, mainly as a result of weak inflation, it seems unlikely that things will change materially over the next 3-months.

Higher prices for gasoline and some other items in the aftermath of the hurricanes will likely boost inflation temporarily; apart from that effect, inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee’s 2 percent objective over the medium term. — FOMC Statement

Additionally, the Fed projects GDP to remain soft near 2% through 2020. The central bank’s longer-run growth projection remains 1.8%. The Fed tends to be overly-optimistic on both growth and inflation, so their current projections just don’t seem to warrant tighter policy.

Somehow the Fed is clinging to their credibility, but I suspect gold and the dollar have overreacted to the perceived hawkishness implicit in the announcement of balance sheet normalization and the dots that suggest that the members of the FOMC see rates continuing to ratchet higher.

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

North Korea accuses US of declaring war, says can take countermeasures

CNBC/Jacob Pramuk/09-25-17

North Korea’s foreign minister on Monday accused President Donald Trump of declaring war, saying that gives the rogue regime the right to take countermeasures.

That includes the right to shoot down strategic U.S. bombers, even when they are not flying in North Korean airspace, Foreign Minister Ri Yong Ho told reporters in New York.

“The whole world should clearly remember it was the U.S. who first declared war on our country,” he said.

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Posted in Geopolitical Risks, North Korea |

Gold pushes back over $1300 mark, up $9 on day

North Korea’s Foreign Minister Ri says:

“North Korea has the right to shoot down U.S. warplanes as part of its right to self-defense under the United Nations charter. . . All options are on the table for North Korean response…The whole world should clearly remember it was the US who first declared war on our country.” (As reported by Reuters)

USAGOLD note: Move sudden.  Not sure if North Korea inspired or something else going on.  We will report back when we know more.

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RAY DALIO: US economy looks like 1937 and we need to be careful

Business Insider/Henry Blodget/09-23-17

Business Insider CEO Henry Blodget spoke with Bridgewater’s Ray Dalio about the current circumstances of the US economy.

In my opinion, the risks are asymmetric on the downside. In other words, if you tighten monetary policy, certainly by more than is discounted in the market — and what’s discounted in the market is very minor rising market — that will reverberate through asset class prices, as well as then you can have a situation in terms of the economy. So, what’s similar in that: interest rates are close to zero, not much room on the downside, obligations are large, there was a political division, there is more populism. Therefore there’s more conflict. And therefore we need to be very careful at this moment. — Ray Dalio
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Posted in Debt, Economy |

Merkel’s conservatives suffer worst election result since 1949 as German far right sees surge in support


CNBC/Matt Clinch/09-25-17

Angela Merkel’s conservative bloc will be the largest party in the next German parliament, but provisional election results point to a worse-than-expected majority for the German chancellor.

Merkel’s center-right Christian Democratic Union (CDU) and its Bavarian sister-party the Christian Social Union (CSU) won 33 percent of the vote. It would make them the largest parliamentary group, but that is down from 41.5 percent in the last election in 2013 and lower than recent polling. It is also their worst result since 1949, according to Reuters.

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Posted in Politics |

Gold falls as dollar firms, N.Korea worries ease


Reuters/Nithin ThomasPrasad/09-25-17

Gold prices dropped on Monday and hovered around one-month lows hit last week, as the U.S. dollar firmed and concerns over the Korean peninsula eased.

…”(Angela) Merkel’s win in the German federal elections and a quiet news weekend on the North Korean front, saw the U.S. dollar opening stronger and gold’s weekend safe-haven premium eroded from Friday,” said Jeffrey Halley, a senior market analyst with OANDA.

…”I guess markets are relieved about the ongoing sanctions against North Korea. If you see what China and (U.S. President Donald) Trump have done last week, it seems they are trying to achieve a peaceful resolution,” said OCBC analyst Barnabas Gan.

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Posted in Gold News, Gold Price, Gold Views |

Japanese Prime Minister Shinzo Abe calls snap election

CNN/Yoko Wakatsuki & James Griffiths/09-25-17

Japanese leader Shinzo Abe has called an early election to take advantage of higher opinion polls to secure a stronger mandate as the country prepares to respond to increasing threats from North Korea.

Pyongyang has fired two ballistic missiles over northern Japan in recent weeks, as it steps up missile tests amid a deepening regional crisis.

In a national address Monday, Abe said he’ll dissolve parliament’s lower house on Thursday to “seek the mandate of the people immediately.”

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Posted in Geopolitical Risks, Politics |