Monthly Archives: October 2017

Gold continues southward trek, euro in tailspin

LATE REPORT

Gold continued its trek southward today with a drop of $10.37 finishing at $1266.86. Silver in similar fashion finished the day down 15¢ at $16.77. Today’s downside came the result of speculation that the next Fed chairman would bring a hawkish tone to interest rate and monetary policy, but that decision is still very much up in the air.  Also the European Central Bank announced it would halve its bond buying program from 60 billion to 30 billion euros per month, but undercut the reduction by extending the time frame 9 months from January to September, 2018.  The announcement sent the euro into a tailspin, the dollar higher and gold lower.


Small Observation
A situation that may or may not occur combines with a different situation likely to inspire strong precious metals demand among the local citizenry.  The two somehow conspire to drive prices lower. Contrarians, please take note.


Quote of the Day
“[T]he time had come, as in all periods of speculation, when men sought not to be persuaded by the reality of things but to find excuses for escaping into the new world of fantasy.” – John Kenneth Galbraith, The Great Crash of 1929


Market Anecdote
Bernard Baruch, the famous early 20th century stock speculator, in explaining the behavior of markets:

“Have you ever seen in some wood, on a sunny quiet day, a cloud of flying midges — thousands of them — hovering, apparently motionless, in a sunbeam? …Yes? …Well, did you ever see the whole flight — each mite apparently preserving its distance from all others — suddenly move, say three feet, to one side or the other? Well, what made them do that? A breeze? I said a quiet day. But try to recall — did you ever see them move directly back again in the same unison? Well, what made them do that? Great human mass movements are slower of inception but much more effective.”

This is the same Bernard Baruch who just before the stock market crash of 1929 liquidated his stock holdings and put his money into bonds and cash, and then later, after the crash, dumped a good portion of his fortune into gold. When asked why he would do such a thing by the Secretary of the Treasury, Baruch replied that he was “commencing to have doubts about the currency.”

While others banked on the 1920’s stock mania, Baruch’s intuition was telling him that there was something amiss. There are times when it pays to distinguish yourself from the crowd – the midge that flies in the other direction.


If you are commencing to have doubts about the currency, or at the very least, if you are commencing to have doubts about the stock market perhaps the time has come to speak with a USAGOLD representative about hedging your portfolio with the precious metals.

In the meantime, if you would like a different perspective on the economy and the financial markets – one distinctly separate from what is bandied about in the financial press as the daily regimen – you would probably enjoy our newsletter.

November issue (to be released next week)
Government finances and gold (revisited)
What does it take to garner a real rate of return on your money these days
Four steps to becoming a successful gold and silver investor
And more. . . . .

It is available free of charge  to our current and prospective clientele, and we invite you to sign up here.  Immediate access to our October issue.


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Fed chair choice down to Powell, Taylor, one source tells Politico

Reuters/Tim Ahmann/10-26-17

President Donald Trump’s search for the next chair of the U.S. Federal Reserve has come down to Fed Governor Jerome Powell and Stanford University economist John Taylor, Politico on Thursday cited one source as saying, while another counseled caution.

…A White House official told Reuters: “No final decision has been made.”

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Posted in Central Banks, Fed |

The Daily Market Report: Gold Falls Within Range as Dovish ECB Lifts Dollar


USAGOLD/Peter Grant/10-26-17

Gold has turned more defensive within the range, dropping to fresh 3-week lows. The yellow metal is being pressured by strength in the dollar after a dovish ECB pushed the euro lower.

The ECB held steady on policy as was widely expected. While QE was extended by 9-months, the monthly purchases were halved to €30 bln.

Mario Draghi maintained a dovish bias during his presser, stressing that an “ample degree of monetary stimulus remains necessary.” He also said that QE remains “open-ended” and could be extended. There is some speculation that cutting the size of the monthly purchases was a necessary reaction to an absence of supply.

News that the U.S. $4 trillion 2018 budget narrowly passed the House, is further stoking risk appetite. This is seen as another significant hurdle toward advancing tax cuts.

Politico cited an unnamed source, said to be close to the President, as saying that the field of potential replacements for Janet Yellen has been narrowed to Jerome Powell and John Taylor. The former being a centrist, the latter thought to be a hawk.

While this may be modestly moving the policy expectations needle toward hawkish, the White House has said that no final decision has been made. The President is likely to make the nomination before he leaves for Asia on November 3.

Another unnamed senior source that Politico described as very close to the process said it was not safe to assume Trump will nominate Powell or Taylor for the top spot at the central bank, saying he “changes his mind about it every day.” — Reuters

On the support side of the equation are geopolitical tensions regarding Catalonia and North Korea. And political tensions associated with various ongoing investigations and the recent discord among GOP Senators.

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

Budget narrowly passes House, a key step in tax reform

CNN/Ashley Killough/10-26-17

The House of Representatives narrowly passed a budget resolution Thursday that clears the path for Congress to fast-track tax reform legislation.

The vote was 216-212, with 20 Republicans joining Democrats in opposing the measure.

Republicans passed the bill despite some opposition within the party over a plan to eliminate the popular State And Local Tax deduction in the tax reform framework.

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Posted in Politics |

Catalan crisis: Puigdemont under pressure over independence bid

BBC/10-26-17

Pressure is rising on Catalonia’s President Carles Puigdemont over his regional government’s drive for independence from Spain.

He is expected to make a statement in Barcelona at 17:00 (15:00 GMT) to clarify his position.

The Spanish government plans to strip the regional government and Mr Puigdemont of their powers.

Article 155 of the Spanish constitution lets Madrid take control of institutions, police and finances.

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Posted in Geopolitical Risks |

Gold dips as dollar gains versus euro after ECB decision

Reuters/Maytaal Angel/10-26-17

Gold dipped on Thursday as the dollar gained versus the euro after the European Central Bank said it would cut back its bond purchases but hedged the move by also extending the lifespan of its bond-buying programme.

The ECB’s decision to cut back bond purchases was widely expected and factored into gold prices and the dollar, with the move to extend the bond-buying programme’s lifespan taking the wind out of the euro’s rally versus the dollar.

…Also weighing on gold and boosting the dollar was fresh speculation that the next Federal Reserve chair could be a policy hawk following reports that current Fed chair Janet Yellen is out of the race.

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Posted in Gold News, Gold Price, Gold Views |

U.S. NAR pending home sales unch at 106.0 in Sep, below expectations of +0.4%, vs negative revised 106.0 in Aug; -3.5% y/y.

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Posted in Economic Data |

ECB to extend QE until September at lower rate of €30bn a month


FT/Claire Jones/10-26-17

The European Central Bank will extend its bond-buying scheme until at least September next year and possibly beyond to keep the eurozone recovery on track but will halve its rate of purchases to €30bn a month.

…The ECB struck a dovish tone, saying it stood ready to extend QE beyond September or even raise the level of monthly purchases should conditions worsen again. It also stuck to its line about keeping rates lower until well after it stops its bond purchases.

Mario Draghi, ECB president, said the changes announced on Thursday did not amount to a “tapering” of QE but a “down size” to a programme that remained “open-ended”.

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Posted in Central Banks, ECB, Monetary Policy, QE |

The Morning Snapshot: Gold remains consolidative below $1300

USAGOLD/Peter Grant/10-26-17

Gold continues to consolidate below $1300 after ECB policy came in as expected: Steady on rates and smaller QE for longer. Mario Draghi’s press conference is ongoing.

U.S. initial jobless claims rebounded 10k last week, but the print was still below expectations. The trade gap widened in-line with expectations.

There are reports circulating this morning, citing Politico, that Janet Yellen and Kevin Warsh are out of the running for Fed chair. That may mean that the field has narrowed to John Taylor and Jerome Powell.

The dollar index is probing back above 94.00, buoyed by a dovish ECB and the resulting weaker euro. That is keeping gold defensive. Political and geopolitical tensions continue to provide support.

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

U.S. advanced trade gap widened to -$64.1 bln in Sep, near expectations of -$64.0 bln, vs revised -$63.3 bln in Aug.

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Posted in Economic Data |

U.S. initial jobless claims +10k to 233k in the week ended 21-Oct, below expectations of 235k.

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Posted in Economic Data |

ECB leaves rates unchanged, in line with expectations. QE extended for 9-months, but reduced to €30 bln. Draghi presser underway.

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Posted in Central Banks, ECB, Monetary Policy, QE |

Gold lower at 1274.79 (-4.78). Silver 16.93 (-0.063). Dollar higher. Euro lower. Stocks called mixed. U.S. 10-year 2.43% (unch).

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Posted in Gold Price, Markets |

North Korean official: Take hydrogen bomb threat ‘literally’

CNN/Will Ripley/10-25-17

A senior North Korean official has issued a stern warning to the world that it should take “literally” his country’s threat to test a nuclear weapon above ground.

The official, Ri Yong Pil, told CNN in an exclusive conversation in Pyongyang that the threat made by North Korea’s foreign minister last month should not be dismissed. North Korea “has always brought its words into action,” Ri said, visibly angry.

…”The foreign minister is very well aware of the intentions of our supreme leader, so I think you should take his words literally,” Ri told CNN in Pyongyang.

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Posted in Geopolitical Risks, North Korea |

Catalonia vice president says Spain has given region no choice but to declare ‘new republic’

The Independent/Caroline Mortimer/10-25-17

Catalonia’s vice-president has said that the Spanish government has given them “no choice” but declare independence.

Oriol Junqueras said his party, one of the two in the ruling separatist coalition which forms the Catalan government, is “going to work toward building a republic” because they have a “democratic mandate” following a referendum earlier this month.

PG View: Either way, Spain appears poised to invoke Article 155 before the end of the week, suspending Catalonia’s autonomy.

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Posted in Geopolitical Risks |

The Daily Market Report: Gold Consolidates, Awaiting Clarity on Several Fronts


USAGOLD/Peter Grant/10-25-17

Gold continues to consolidate in the recent range as the market seeks some clarity on Fed succession and ECB policy. The former is reportedly unlikely to happen this week, while the ECB will announce policy tomorrow.

The short list for the next Fed chair includes John Taylor, Jerome Powell and a reappointment of Janet Yellen. If these are really the only three in contention, then Janet Yellen is President Trump’s best bet for furthering his reflation agenda. Whether she would stay on or not is an open question. I wrote in great detail on this topic in yesterday’s DMR.

Tomorrow the ECB is expected to hold steady on policy, as the BoC did today. As for the QE question, there seems to be an expectation that the ECB will signal that it will buy fewer assets for a longer time. Sort of a taper, but not really, as Draghi may be hoping for signs that better growth prospects are taking hold before he really moves the central bank toward tighter policy.

Just a week after the Senate passed a budget proposal — a key step in advancing proposed tax cuts — the President’s support in the Senate has been rattled. Arizona Sentaror Jeff Flake said today that “a lot more” Republicans are poised to speak-out against Mr. Trump.

If the President is losing the support of the GOP, yet another key piece of his agenda may be in jeopardy. I would also point out that tax reform has been a primary driving force behind the stock market rally. If the tax cuts are not passed before year-end, there is some risk that equities could rollover.

Capital coming out of shares would find its way to safe-haven assets, including gold. If the yellow metal pushes back above 1308.80 in the near term, a resumption of the uptrend that has dominated this year would become likely.

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

Fed succession talk pushes gold to 2-1/2 week low

Reuters/Peter Hobson/10-25-17

Gold touched a 2-1/2 week low on Wednesday after reports that Republican senators favoured John Taylor to become the next head of the U.S. Federal Reserve drove U.S. bond yields to multi-month highs.

Taylor, a Stanford University economist, is seen as someone who could put the Fed on a path of faster interest rate increases compared with current Fed Chair Janet Yellen, whose term expires next February.

Upbeat U.S. durable goods and home sales data also bolstered the case for interest rate rises, helping push U.S. 10-year Treasury yields to the highest since March and yields on 30-year bills to the highest since May.

PG View: Subsequently, gold rebounded to trade higher in the range, leaving the range low from early-Oct well protected as the dollar index stalled ahead of important resistance at 94.00.

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Posted in Gold News, Gold Price, Gold Views |

U.S. new home sales +18.9% to 667k pace in Sep, well above expectations of 550k, vs 561k in Aug.

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Posted in Economic Data |

BoC holds steady on rates, in line with expectations. Cautiously hawkish bias maintained.

“While less monetary policy stimulus will likely be required over time, Governing Council will be cautious in making future adjustments to the policy rate.”
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Posted in BoC, Central Banks, Monetary Policy |

Morning Snapshot: Gold steadies as dollar gains stall

USAGOLD/Peter Grant/10-25-17

Gold is maintaining a generally consolidative tone within the recent range, as gains in the dollar index stalled ahead of head of important resistance at 94.00/14. The yellow metal needs to reclaim $1300 to ease short term pressure on the downside and return confidence to the dominant uptrend.

A better than expected Q3 GDP print for the UK sparked a rebound in Sterling, amid reinvigorated hopes that the BoE will raise rates next week, for the first time in more than a decade. This has weighed on the dollar.

U.S. data today were generally positive with durable goods orders, new home sales and home prices all beating expectations. The Bank of Canada will announce policy today (steady expected) and the ECB is up tomorrow.

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

U.S. FHFA home price index +0.7% to 251.8 in Aug, vs positive revised 250.2 in Jul; +6.6% y/y.

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Posted in Economic Data |

U.S. MBA mortgage market index -4.6% in week ended 20-Oct; purchases -6.1%, refis -3.0%.

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Posted in Economic Data |

U.S. durable goods orders +2.2% in Sep, well above expectations of +1.2%, positive revised 2.0% in Aug.

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Posted in Economic Data |

Second US carrier enters western Pacific, will ‘operate’ with carrier group off Korea amid nuke tensions

AsiaTimes/10-24-17

The super carrier USS Theodore Roosevelt and its supporting warships have entered the western Pacific and will “integrate” with other US ships deployed in the region, including those near the Korean peninsula.

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Posted in Geopolitical Risks, North Korea |

The Daily Market Report: Gold Pulls-Back Within Range as Dollar and Stocks Rally


USAGOLD/Peter Grant/10-24-17

Gold pulled back within the range, weighed by risk appetite and a firm dollar. On the other side of the coin, are political and geopolitical risks offering support. These opposing forces have kept the yellow metal fairly well contained of late.

While the underlying trend remains positive, a definite push back above $1300 is needed to return focus to the high for the year at 1357.50. That high was established back in early-September.

President Trump’s impending choice for Fed chair is also weighing somewhat on gold, with a couple of policy hawks in contention. While the Fed chair does not set policy alone, a vocal hawk at the head of the table, would give the impression that rates are more likely than not to head higher.

My contention is that if “reflation” is the goal of the President, why hamstring yourself by appointing a hawk? It would seem that Janet Yellen might be the ideal choice. She is both a dove and a know commodity to the markets. However, there are considerable doubts as to whether the President will reappoint her, and whether she’d accept if asked to serve again.

At the other extreme is economist John Taylor, whose Taylor Rule suggests that the Fed funds rate should be closer to 4% than 1%. It would be difficult to convince the current FOMC to move away from the slow/steady tightening regime instituted by Yellen, but he would also be under constant external pressure to institute the rule that bears his name.

And it’s worth remembering that the Fed opted to hold steady on rates in September. The pause was largely inspired by the Fed’s inability to generate 2% inflation. While there have been some indications of hotter inflation more recently, it is largely thought to be associated with higher energy prices in the wake of the recent hurricanes. The situation with regard to inflation probably really hasn’t changed much since September, so why is the market fully pricing in a December rate hike?

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

‘Real’ Gold Bull Market Is Coming, It Just Needs This First – Pierre Lassonde


KitcoNews/Anna Golubova/10-24-17

Gold prices will only go up, rising as high as $1,400 next year, but the “real” bull market won’t get going until it sees an actual pickup in inflation, said mining magnate Pierre Lassonde.

…inflation could accelerate soon enough, with both reconstruction following the damage caused by hurricanes Irma and Harvey in the U.S. as well as a recovery in Europe moving the needle in the right direction, he said.

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Posted in Gold News, Gold Price, Gold Views |

Richmond Fed index fell to 12 in Oct, vs 19 in Sep.

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Posted in Economic Data |

U.S. Markit manufacturing PMI rose to 54.5 in Oct, above expectations of 53.4, vs 53.1 in Sep. Services 55.9, above expectations of 55.2, vs 55.3 in Sep.

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Posted in Economic Data |

Gold slips on nerves ahead of Fed chair decision

Reuters/Eric Onstad/10-24-17

Gold dipped on Tuesday as investors nervously awaited news on the new head of the U.S. central bank while strong share markets and a calmer geopolitical environment sapped safe-haven demand.

“The hawkish speculation about a new Fed chair has added some downside pressure,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

President Donald Trump told reporters on Monday he is “very, very close” to making his decision on who should chair the U.S. Federal Reserve.

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Posted in Gold News, Gold Price, Gold Views |

Morning Snapshot: Gold retreats into range as stocks lurch higher

USAGOLD/Peter Grant/10-24-17

Gold has retreated into the range once again as stocks lurch higher. The dollar is firmer this morning as well, but solid resistance in the dollar index at 93.99/94.14 remains intact.

Political and geopolitical tensions continue to be seen as supportive for the yellow metal. The government of Catalonia is expected to respond to Spain’s demands on Thursday. Japan’s Defense Minister categorized the North Korea threat as having “grown to the unprecedented, critical and imminent level.”

Today’s U.S. economic calendar is light today with Markit PMIs for October and the Richmond Fed index. Tomorrow the BoC will announce policy, followed by the ECB on Thursday.

Both policy decisions and the guidance will be interesting, as recent data — particularly weak inflation — may have derailed tightening plans. If easier policy prevails, the Canadian dollar and euro may come under further pressure.

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