Monthly Archives: December 2017

Gold lower at 1255.70 (-8.69). Silver 15.85 (-0.15). Dollar higher. Euro lower. Stocks called mixed. U.S. 10-year 2.34% (unch).

Posted in Gold Price, Markets, Silver Price |

JP Morgan says $1300 barrier will be breached in 2018


Gold was down marginally today at $1263, but since reversing in its latest attempt to breach the $1300 barrier, it is down about $31 (from $1294).  Silver has followed along though with a greater percentage loss.  It finished today $15.93, down about 15¢ on the day and $1.09 from it’s recent high water mark of $17.27 (11/17).  JP Morgan, however, believes that the $1300 mark will be breached by the second half of 2018 saying “As we believe gold rallies on the back of US real yields potentially stagnating in 2H18, we see even greater upside potential in silver given its historical tendency to outperform gold during outsized rallies.”  Not sure what they mean by “outsized”, but they think gold will be trading in $1340 range by 2018 year end.

Quote of the Day
“We’re in a stage where if nothing is changed, we’re about to go from stagnation to stagflation, with a significant rise in inflation and a wholly significant imbalance in the economy, which is very difficult to anticipate at this stage. But the outlook is not exactly terrific.” – Alan Greenspan (12/6/2017)

Here we are in December, chugging along toward the end of the year.  In the recently released December issue of News & Views, we concentrate on the gold market itself with a variety short but informative reports with the upcoming year in mind:

• On the ghosts of Decembers past
• End-of-year gold and silver price predictions
• U.S. Mint makes a mint selling gold coins at a 25% mark-up
• Gold’s mysterious waterfall drops
• The gold/quality man’s suit ratio

• And a long run of “Notable Quotables” for your reading pleasure

If you are not already a subscriber, we invite you to sign-up for free immediate access to the December issue, as well as future issues of our newsletter.  We think you will enjoy the subject matter and gain from our take on recent events in the gold market.

With the recent addition of our brand new Online Order Desk, we offer a secure portal to buy gold and silver at great prices day or night at your convenience.  We encourage you to visit and look around. . . .



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US yield curve flattens at fastest pace since financial crisis

FT/Joe Rennison/12-06-17

The difference between short-dated and longer-dated US Treasury yields has narrowed at its fastest pace since 2008, as investors anticipate a quicker rate of policy tightening from the Federal Reserve next year.

The difference between two- and 10-year yields has fallen 33 basis points to just 52 basis points over the past 30 days, while the difference between five- and 30-year yields has fallen 34 basis points, surpassing declines prompted by the European sovereign debt crisis in 2011 and reaching a pace last seen during the financial crisis, according to analysts at Citi.

It marks a pronounced “flattening” of the yield curve, with investors receiving decreasing returns for holding longer-dated bonds compared to shorter-dated notes — typically a harbinger of economic recession.

Posted in Economy, Markets |

The Daily Market Report: Gold Defensive at Low End of Range

USAGOLD/Peter Grant/12-06-17

Gold is consolidating at the low end of the range. While the yellow metal did set a new 4-month low yesterday, the breach of support was just by a dime.

The market is now awaiting developments on the government funding front, which has reportedly met some opposition from conservative Republicans. In addition, the opposing sides of aisle continue to spar over the inclusion of DACA. Republicans are saying there is no way DACA will be in a funding bill, while Democrats are saying they will not vote for any legislation without it. Tick-tock; the government faces a shutdown on Friday.

One thing is for certain, the debt ceiling is going to have to be raised (or suspended). That is a fact both as a prerequisite to any new funding and to accommodate whatever version of tax reform ultimately gets signed into law.

It is widely conceded that the tax cuts will reduce federal revenue by $1.3 trillion to $2.0 trillion over 10-years. Even when scored dynamically — taking into consideration expectations for higher growth — revenue is expected to fall by $0.5 trillion to $1.7 trillion. That’s going to require more borrowing, resulting in a higher national debt.

There seems to be some skepticism about the magnitude of GDP growth attributable to the tax plan. Ongoing flattening of the yield curve actually portends recession.

That’s likely to be a topic of conversation at the FOMC meeting next week. Additionally, today’s revisions to Q3 productivity are troubling; particularly the negative revision to unit labor costs. Q3 ULCs were revised to -0.2%, from +0.5% previously and -1.2% in Q2 (was 0.3%). Real compensation declined 1.1% y/y, the fourth consecutive quarterly decline.

These data undermine the hopes that compensation was on the rise and would have a positive impact on inflation. This is something else the Fed is going to have to rationalize if they really intend to hike rates next week. It looks like below target inflation is going to remain “transitory” for a while longer.

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

Remember What Happens To Gold In December

SeekingAlpha/Andrew McElroy/12-06-17

…Since 2013, every sell-off in December has led to a sizable rally in Q1 of the next year.

In 2015 and 2016 the December low also happened to line up with a Fed rate hike. The extended sell off into the hike combined with overly bearish sentiment led to significant reversals.

Posted in Gold News, Gold Price, Gold Views |

Gold recovers from two-month low as dollar weakens

Reuters/Zandi Shabalala/12-06-17

Gold prices held near a two-month low on Wednesday, ahead of a vote over the U.S. tax reform plan but a potential government shutdown lent support.

…”A shutdown in the government should be positive for gold but that could be temporary because no one really expects the U.S. to default,” said Capital Economics commodities economist, Simona Gambarini.

Posted in Gold News, Gold Price, Gold Views |

U.S. third-quarter unit labor costs revised sharply down

Reuters/Lucia Mutikani/12-06-17

U.S. unit labor costs were much weaker than initially thought, declining both in the second and third quarters of this year, suggesting that inflation could remain benign for a while.

The Labor Department said on Wednesday that unit labor costs, the price of labor per single unit of output, dropped at a 0.2 percent annualized rate in the last quarter instead of increasing at a 0.5 percent pace as reported last month.

PG View: With compensation declining into year-end, hopes for resurgent inflation are dimmed. The Fed should take this into consideration when they meet next week.

Posted in inflation |

U.S. Q3 productivity steady at +3.0%, below expectations of +3.3%, vs +3.0% previously and +1.5% in Q2; ULCs revised down to -0.2% from +0.5%.

Posted in Economic Data |

U.S. ADP employment survey +190k in Nov, above expectations of 188k, vs 235k in Oct.

Posted in Economic Data |

Gold steady at 1266.26 (-0.04). Silver 16.08 (-0.05). Dollar steady. Euro easier. Stocks called lower. U.S. 10-year 2.32% (-3 bps).

Posted in Gold Price, Markets, Silver Views |

Gold edging higher in late trading, after slightly exceeding the range low at 1260.10 earlier in the session.

Posted in Gold News, Gold Price |

The Daily Market Report: Gold Drops to Challenge Low-End of Range

USAGOLD/Peter Grant/12-05-17

Gold is down, challenging the low end of the range that has dominated for the past two-months. The yellow metal is being weighed by persistent optimism that tax reform is going to get passed this year, the impending government shutdown will be averted and the Fed will raise rates next week.

The current continuing resolution to fund the government expires on Friday. It’s a given at this point that a new budget will not be passed, but there is an expectation that another temporary spending measure will be reached in order to prevent a government shutdown. Of course another kick of the can does nothing to resolve the underlying problems, not the least of which is the massive and growing debt burden.

That debt burden is expected to grow significantly if the current version of tax reform is ultimately signed into law. The University of Chicago recently asked a panel of economic experts to react to the following statement:

If the US enacts a tax bill similar to those currently moving through the House and Senate — and assuming no other changes in tax or spending policy — the US debt-to-GDP ratio will be substantially higher a decade from now than under the status quo.

Not a single participant disagreed with that statement. When asked whether “US GDP will be substantially higher a decade from now than under the status quo,” a mere 2% agreed that it would. The rest were either uncertain or disagreed.

The Fed really needs to ask themselves during deliberations next week, how confident they are that tax reform is going to provide a fiscal jolt to the economy; to the point where they can continue removing monetary accommodations. If confidence is low — similar to the UC survey — then staying on hold seems the logical policy decision.

The continued absence of inflation and the flattening of the yield curve seem to be also in favor of leaving the Fed funds rate unchanged. However, with the pre-FOMC FedSpeak blackout underway, at this point it’s too late to try and change the market’s mind.

I also think the central bank is disinclined to surprise the market. If the Fed is worried about any of these factors, they may go ahead and hike rates, but issue a dovish policy statement.

With jobs data out on Friday as well, the next week or so has the potential to be pretty interesting. Gold sold off into year-end in both 2016 and 2017, only to rally back after the December FOMC. What’s different this year is that the year-end action has been more consolidative than an an actual sell-off.

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

Gold Looks Like a Bargain Just in Time for Christmas

Forbes/Frank Holmes/12-03-17

…As of my writing this, gold is trading around $1,280, up 11 percent in 2017. That’s off 5 percent from its 52-week high of $1,351 set in September. If it stays at its present level until the end of the year, the metal will end up logging its best year since 2010, when it returned 30 percent.

…Considering it’s faced a number of strong headwinds this year—a phenomenal equities bull run that’s drawn investors’ attention away from “safe haven” assets, lukewarm inflation and anticipation of additional rate hikes, among others—I would describe its performance in 2017 as highly respectable.

…What this means is that, compared to domestic equities, gold is highly undervalued right now. The gold-to-S&P 500 ratio, a time-tested trading indicator, is near 50-year lows. I see this as a strong buy signal, especially now as we await the Federal Reserve’s decision to lift rates this month.

PG View: Two days after this story initially appeared at Forbes, gold is now closer to 1260 than 1280.

Posted in Gold News, Gold Price, Gold Views |

These Factors Helping Gold Hold Up Near Bottom Of Range

USAGOLD/Allen Sykora/12-05-17

Gold prices are near the bottom end of their two-month-old trading range, but analysts say the precious metal does have a number of factors preventing a further breakdown through chart support, at least for now.

This includes uncertainty about how quickly Congress will reconcile differing versions of U.S. tax reform, the impact of this upon the federal deficit, along with ongoing geopolitical and political issues.

Posted in Gold News, Gold Price, Gold Views |

U.S. ISM services fell to 57.4 in Nov, below expectations of 59.0, vs 60.1 in Oct. Prices fall to 60.7 from 62.7 in Sep.

Posted in Economic Data |

Morning Snapshot: Gold Weaker At The Low End of Range

USAGOLD/Peter Grant/12-05-17

Gold is down within the well defined range, weighed by intraday dollar gains and firm stocks. The low end of the range at 1260.10 is protected by an intervening tier of support at 1263.00.

Risk appetite remains elevated as tax reform makes its way through the process. Additionally, it looks like Congress is going to kick the can yet again on funding for the government and the debt ceiling, averting a partial government shutdown at the end of the week. “There’s not going to be a government shutdown,” said Senate Majority Leader Mitch McConnell.

There still some political wrangling to be done, both on the funding measure and on the tax bill, and there’s not a heck of a lot of time. However, markets seem optimistic that both are going to get done.

The U.S. trade deficit widened to -$48.7 bln in October, outside expectations of -$46.6 bln. What’s interesting is that the deficit is nearly as wide as it’s been in 5-years, despite the fact that the dollar has been under pressure for most of the year.

While the greenback was on the rise from September through early-November, at the end of October the dollar index was down 7.3% YTD. If President Trump really wants to improve the trade balance, it seems a much weaker dollar is going to be needed.

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

U.S. trade deficit widened to -$48.7 bln in Oct, outside expectations of -$46.6 bln, vs revised -$44.9 bln in Sep (was -$43.5 bln).

Posted in Economic Data |

Gold lower at 1272.77 (-3.93). Silver 16.24 (-0.11). Dollar higher. Euro lower. Stocks called higher. U.S. 10-year 2.39% (+2 bps).

Posted in Gold Price, Markets, Silver Price |

Economist Jim Rickards on gold versus bitcoin — intrinsic value is meaningless for both but the bitcoin prices aren’t real

BusinessInsider/Jacqui Frank & Kara Chin/12-03-17

Jim Rickards is the editor of Strategic Intelligence and the author of Currency Wars: The Making of the Next Global Crisis. He believes gold can go to $10,000 an ounce but he is much more skeptical about bitcoin. Rickards doesn’t trust the bitcoin price action and doesn’t believe the cryptocurrency will fare well in a financial crisis.

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

Dovish Fed Prompts Hedge Funds To Buy Gold – Analysts

KitcoNews/Neils Christensen/12-04-17

…“The return of a low inflation narrative, as the minutes revealed many policymakers are concerned that inflation may remain weak for longer than expected, prompted dollar weakness and a flattening of the yield curve,” said Melek. “This saw the opportunity and carry costs of holding the zero-yielding assets reduced, leading to increased interest in the yellow metal.”

Looking ahead, Melek added that he expects to see gold well supported in the near term as hedge funds look for safe-haven investments to protect against escalating geopolitical risks and ongoing drama in Washington D.C

Posted in Gold News, Gold Price, Gold Views |

The Daily Market Report: Gold Consolidates Within Range

USAGOLD/Peter Grant/12-04-17

Gold is maintaining a consolidative tone in the lower half of the well defined range. Heightened risk appetite is limiting the upside for gold, as optimism over the tax overhaul boosts stocks.

The question now becomes, how quickly can Congress reconcile the House and Senate versions of the legislation? And what will that final version look like?

With the Christmas recess just a couple weeks away, the window did get something to the President’s desk before year-end is pretty small. Further complicating matters is the need to get at least a temporary spending measure in place before December 8.

Democrat leaders have reportedly agreed to a White House meeting on December 7, which again doesn’t give them much time to reach an arrangement. A similar meeting was scrubbed last week after President Trump chided Chuck Schumer and Nancy Pelosi via Twitter for some of their alleged demands and then said he didn’t “see a deal.”

The market is already looking ahead to Friday’s release of November jobs data and next week’s FOMC meeting. Median expectations for nonfarm payrolls is +198k, with the unemployment rate holding steady at 4.1%. Expectations for a rate hike continue to hover around 90% probability.

St. Louis Fed President James Bullard said last week that “there is a material risk of yield curve inversion over the forecast horizon if the FOMC continues on its present course of increases in the policy rate.” An inverted yield curve is a reliable indication of an impending recession so the implication here is that the Fed might want to stay on pause to prevent that from happening.

The market doesn’t seem to care; perhaps because Bullard is not a voter this year. However, there are other doves on the committee that do get a vote.

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

U.S. factory orders -0.1% in Oct, above expectations of -0.3%, vs positive revised +1.7% in Sep. Inventories +0.2%.

Posted in Economic Data |

Gold Heads for Month Low as U.S. Senate Passes Trump’s Tax Cuts

Bloomberg/Eddie Van Der Walt & Ranjeetha Pakiam/12-04-17

Gold headed for the lowest close in a month as the dollar climbed after Senate Republicans on Saturday approved a rewrite of the U.S. tax code, stoking optimism over President Donald Trump’s stimulus plans.

…“In the early hours of Saturday morning, the U.S. Senate then passed a tax reform bill that envisages extensive tax cuts,” analysts at Commerzbank AG including Eugen Weinberg said in an emailed note. “Market participants regained their risk appetite as a result, so the gold price fell accordingly.”

PG View: Gold has actually been extremely resilient relative to the gains achieved in stocks.

Posted in Gold News, Gold Price, Gold Views |

U.S. drills in South Korea trigger ‘nuclear war’ warning from North

NBCNews/by Alexander Smith/12-04-17

Two dozen U.S. stealth jets were among hundreds of aircraft involved in war games intended as a show of strength to neighboring North Korea on Monday.

Dubbed Vigilant Ace, the annual military drills come amid heightened tensions in the region triggered by Kim Jong Un’s missile and nuclear tests and ratcheting rhetoric from both sides.

…North Korea described the exercises as a “grave provocation,” claiming in its state-run media Monday that they could escalate the situation “to the brink of nuclear war.”

Posted in Geopolitical Risks, North Korea |

Morning Snapshot: Gold Defensive Within Range as Stocks Surge

USAGOLD/Peter Grant/12-04-17

Gold is down in early U.S. trading to start the week, weighed once again by heightened risk appetite in the wake of the Senate’s passage of tax reform legislation over the weekend. Stock futures are up sharply this morning with the centerpiece of the aforementioned bill being a significant cut to corporate taxes.

U.S. yields jumped, dragging the dollar higher, but the greenback has been unable to sustain gains thus far. Perhaps because the tax bill is expected by many to significantly increase deficits and the debt.

The House is expected to vote today to establish a conference committee, where the House and Senate versions will be reconciled. This is anticipated to be a heavy lift in the short period before the Christmas recess.

The U.S. calendar is light today with October factory orders/inventories. The big event of the week comes on Friday with the November jobs report. Median expectations for nonfarm payrolls are +198k. The unemployment rate is expected to hold steady at 4.1%.

The low end of the well established range in gold remains protected at 1260.10. Dips into the low end of that range have been seen as buying opportunities for more than a month.

Offering support to the yellow metal are heightened geopolitical tensions and ongoing political uncertainty here in the U.S. Softness in the dollar is also providing some support.

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

Gold lower at 1274.35 (-5.83). Silver 16.36 (-0.05). Dollar higher. Euro lower. Stocks called higher. U.S. 10-year 2.39% (+2 bps).

Posted in Gold Price, Markets, Silver Price |

The Daily Market Report: Gold Turns Choppy Within Range, Amid Political Uncertainty

USAGOLD/Peter Grant/12-01-17

Gold rebounded on Friday amid heightened political uncertainty, which tempered risk appetite. All of Thursday’s losses — and then some — were recovered, leaving the low end of the well defined range protected. The DJIA was down 350 at one point in the day.

Former Trump administration insider Michael Flynn reached a plea deal with special prosecutor Robert Mueller. Flynn plead guilty this morning to lying to the FBI and is now cooperating with the Mueller investigation.

In a statement issued after he entered his plea in a federal courthouse in Washington, Mr. Flynn, 58, . . . said that he had agreed to cooperate with federal prosecutors, who are examining whether Mr. Trump’s campaign colluded with Russians during the election and whether the president or his aides sought to cover up those efforts. — NYT

There is speculation that Flynn will testify that he was directed to make contact with the Russians by a senior Trump campaign official, possibly even Donald Trump himself. The broader implications of such a revelation are hard to know, but certainly there is risk to the recent momentum on tax reform and the temporary spending resolution that needs to be passed before December 8.

Despite all the Flynn associated turmoil, word from Senate Majority Leader Mitch McConnell that “We have the votes” to pass tax reform legislation out of the Senate sparked a rebound in stocks.

The Senate version of the legislation could clear the upper chamber as soon as today. Democrats tried to force the bill back into committee by way of a procedural measure, but that effort has failed.

Nonetheless, uncertainty remains high and that should at least protect the downside in gold. A definitive rebound above $1300 is still needed to return a greater degree of confidence to the underlying uptrend that has dominated this year.

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

Flynn to testify Trump ‘directed him to make contact with the Russians’

TheHill/Josh Delk/12-01-17

Former national security adviser Michael Flynn is expected to testify that President Trump instructed him to contact Russian officials during the 2016 campaign, ABC News reports.

Trump “directed him to make contact with the Russians,” ABC’s Brian Ross said Friday, just moments after Flynn entered a guilty plea for lying about his contact with Russians during the presidential transition period.

PG View: This is potentially a real momentum killer for tax reform and the broader Trump agenda as well. Stocks have dropped and gold jumped on the swing in risk appetite.

Posted in Politics |

Ex-Trump national security adviser Michael Flynn pleads guilty to lying to FBI

AP, via Chicago Tribune/Eric Tucker & Chad Day/12-01-17

Former national security adviser Michael Flynn pleaded guilty Friday to making false statements to the FBI, the first Trump White House official to make a guilty plea so far in a wide-ranging investigation led by special counsel Robert Mueller.

…Flynn has been under investigation for a wide range of allegations, including lobbying work on behalf of Turkey, but the fact that he was charged only with a single count of false statements suggests he is cooperating with Mueller’s investigation in exchange for leniency. He was present for consequential moments in the campaign, the transition period and the early days of Trump’s presidency, campaign, making him a valuable potential tool for prosecutors and agents.

PG View: Speculation is that Flynn will testify that he was directed in 2016 by then candidate Trump to make contact with the Russians.

Posted in Politics |