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Author Archives: News
U.S. new home sales +3.7% to 0.555M pace in Jan, below expectations of 0.570M, vs negative revised 0.535M in Dec.
University of Michigan sentiment (final) 96.3 in Feb, above expectations of 96.0, vs 95.7 prelim and 98.5 in Jan.
Gold prices have increased to highs not seen since U.S. President Donald Trump secured election victory in November as investors appear to seek respite in the so-called safe haven.
“(Gold price) support has come from the unwinding of the post-election Trump trade, which has seen bond yields and the U.S. dollar both move lower,” Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen, said in a note on Friday.
The price of gold crept over the $1250 per ounce threshold for the first time in over three months on Friday.
Gold pushed higher for a second straight session on Friday, steering toward its highest settlement price in more than three months, as metals across the board were boosted by a weaker dollar.
…Specifically for gold, Perry said the recent moves higher have opened up more upside for the metal.
“Breaking higher from the recent range between $1,220-$1,244 implies a $24 upside target to $1,268, whilst the move above minor resistance at $1,251 early this morning means that the upside into the high $1,200s should not be ruled out,” he said Friday.
USAGOLD/Peter A. Grant/02-24-17
Gold continues to charge higher, amid the realization that it may take some time before any fiscal policies implemented by the Trump administration to bear fruit. The yellow metal has set new 3-month highs just shy of 1260.00 thus far.
If growth is likely to remain soft, the Fed may be more cautious with regard to the pace of race hikes. Yields have slipped accordingly, which has brought the dollar under pressure. U.S. stocks appear poised to begin the day under pressure as well.
The U.S. calendar is light with January new home sales and the final University of Michigan sentiment read for February.
Gold higher at 1259.78 (+10.16). Silver 18.40 (+0.164). Dollar lower. Euro higher. Stocks called lower. U.S. 10-year 2.34% (-3 bps).
Two weeks ago, we reported that when Goldman observed the latest gasoline demand data, it said that either something must be wrong with the data, or the US is in a recession: as the firm’s commodity analyst Damien Courvalin put it, such a steep drop in in US gasoline demand “would require a US recession.” He added that “implied demand data points to US gasoline demand in January declining 460 kb/d or 5.2% year-on-year. In the absence of a base effect, such a decline has only occurred in four periods since 1960 during which time PCE contracted.”
Bloomberg’s Liam Denning confirms that “big dips in U.S. gasoline demand, especially of 5 percent or more, are almost unheard of outside of a recession or oil crisis.” Goldman then adds that “to achieve the 5.9% decline suggested by the weekly data, our model requires PCE to contract 6%, in other words, a recession.”
PG View: A recession? Huh . . . Haven’t we been talking about growth risks recently? This would certainly give the Fed pause.
With gas prices here in Denver modestly above $2, they can’t really blame an absence of demand on price.
USAGOLD/Peter A. Grant/02-23-17
Gold surged to new highs on the year in early U.S. trading, boosted by firmer bonds and a weaker dollar. The yellow metal cleared resistance at 1244.71, which led to follow-through above 1250.00 and new 15-week highs.
Treasury Secretary Steven Mnuchin was on CNBC this morning talking tax reform. He acknowledged there wasn’t much the Administration could do to boost growth in the short-term, but that tax reform would ultimately bear fruit. He said that it may take until the end of next year to see “sustainable growth of 3% or more.”
That tempering of growth expectations suggests that the Fed might have to take a more cautious approach to the rate hikes that everyone believes are in the cards for this year. The Atlanta Fed’s GDPNow model currently anticipates Q1 growth of 2.4%. The Blue Chip consensus is running around 2.2%.
After seeing just 1.6% annualized growth in 2016, markets were hoping for something better this year. Mnuchin is suggesting we may have to remain patient for another 18-months. If that is indeed they way things will unfold, tighter monetary policy could provide a considerable headwind.
Of course the Fed relies on their own models, but even Janet Yellen acknowledged last week before Congress that growth has been “quite disappointing.” So what’s the Fed to do? Well the market seems to think that three hikes this year is still too optimistic. I think they hold in March and then take a more serious look at another hike mid-year.
An act of Congress in 2015 that temporarily suspended the country’s borrowing limit has taken spotlight off of the debt-ceiling debate, which has repeatedly roiled the markets in recent years.
However, the halt expires on March 15, according to Fitch. After that, the Treasury will need to take on what it calls extraordinary measures to cope with the statutory limit. But, it will ultimately fall on lawmakers to raise or suspend it.
PG View: This could pose quite a conundrum for lawmakers who have historically voted a certain way on the debt ceiling issue . . .
Gold prices jumped Thursday, attempting to snap a string of three declines, as the dollar lost ground to chief rivals in the wake of a fuzzier-than-expected interest-rate assessment from the Federal Reserve.
…Inflation risks and Fed aggressiveness can be conflicting factors for gold. “The major reason is inflation here and the market does not really believe that the Fed will be able to increase the interest rate three times this year,” Aslam said. A plot of forecasts on future rates from Fed policy members, known as the dot-plot, implied that the central bank could lift rates at least three times in 2017.
The administration’s target of 3 percent economic growth is “very achievable” because tax reform, regulatory relief and cuts to banking regulation that encourage lending will boost growth, Treasury Secretary Steven Mnuchin said Thursday morning in his first televised interview since taking office last week.
In an interview on CNBC’s “Squawk Box,” Mnuchin said that the policy changes would not likely begin to translate into economic growth until the end of next year.
USAGOLD/Peter A. Grant/02-23-17
Gold has surged to new highs for the year and the dollar came under pressure as Treasury Secretary Steven Mnuchin spoke on CNBC this morning. Mnuchin tempered growth expectations by saying that it may take until the end of next year to see “sustainable growth of 3 percent or more.”
Mnuchin believes that the proposed tax overhaul is the best path toward that 3%+ growth, and he expects “very significant” tax reform to be passed before Congress’s August recess. Stocks like the notion of tax reform, but the dimmed growth prospects for the next 18-months or so might make the Fed even more cautious than they already are about tightening monetary policy.
Yields and the dollar came under pressure, pushing gold through resistance at 1244.71. That puts the yellow metal at new highs for the year and the highest level since mid-November. The technical picture remains very constructive.
U.S. initial jobless claims +6k to 244k in the week ended 18-Feb, above expectations of 240k, vs downward revised 238k in previous week.
Gold higher at 1247.47 (+10.18). Silver 18.19 (+0.137). Dollar lower. Euro higher. Stocks called better. U.S. 10-year 2.39% (-2 bps).
USAGOLD/Peter A. Grant/02-22-17
Gold edged higher in early trading to approach the high for the year at 1244.71, but slipped later in the session on some political maneuvering in France that lessened Frexit concerns somewhat. The euro rallied, knocking the dollar off its intraday highs.
In a surprise move, French centrist politician François Bayrou threw his support behind Emmanuel Macron. Whether that will be sufficient to derail Marine Le Pen’s chances remains to be seen. Nonetheless, the market seems to be viewing Frexit risks as being somewhat diminished.
The minutes of the January 31-February 1 FOMC meeting revealed that “many” members of the committee saw a chance for another rate hike “fairly soon.” That leaves March on the table, but it surely is no lock. Gold recovered intraday on the non-event.
"Most Fed participants continued to see heightened uncertainty regarding the size, composition, and timing" of fiscal policy changes.
— Pedro da Costa (@pdacosta) February 22, 2017
Fed Governor Powell expressed that the Fed remains on a gradual tightening path with risks fairly balanced. He went on to say that shrinking the balance sheet should be considered once the Fed funds rate is “well away” from the zero bound. More policy vagueness . . .
This will leave the market to focus on the political and geopolitical risks that have been primarily keeping the yellow metal underpinned. Rate hike expectations will continue to wax and wane on incoming data leading into the March FOMC meeting.
Gold prices were little-changed for a second straight day on Wednesday with investors reluctant to take risks ahead of minutes from the Federal Reserve’s most recent policy-setting confab, which could offer guidance on the timing and pace of rate increases.
PG View: I doubt that the minutes will offer much insight. Door will remain open for hikes this year, possibly as soon as March. I’d be looking more for comments about disappointing growth that Yellen acknowledged in testimony before Congress last week.
Greek bond yields plunged to the lowest level in almost a month after creditors reached an agreement that would allow auditors of the nation’s bailout to continue negotiations for the release of another emergency loan payment.
…After Monday night’s meeting, the Greek government agreed to legislate structural reforms demanded by the International Monetary Fund that will lower the threshold of tax-free income and amend the pension system. These changes will come into effect by 2019. Until now, such measures were a red line Prime Minister Alexis Tsipras had said he wouldn’t cross. Its color has now faded.
PG View: There’s no deal, just relief that the negotiating will continue.
USAGOLD/Peter A. Grant/02-22-17
Gold edged higher in overseas trading to bring the high for the year at 1244.71 back within striking distance. The yellow metal remains underpinned by haven interest and rising inflation concerns, despite firmness in the dollar associated with rate hike expectations.
Weakness in the euro continues to buoy the greenback as well, with rising Frexit worries overshadowing some better data out of the EU. Concerns over Grexit have ebbed somewhat as Greece agreed to legislate structural reforms to appease the IMF, keeping the latest bailout deal on the table. However, Marco Stringa, senior economist at Deutsche Bank thinks Italy still represents “the main risk to euro-area stability.”
The U.S. U.S. calendar has January existing home sales and the FOMC minutes from the January meeting. There will also be Fedspeak from Powell.
U.S. existing home sales+3.3% in Jan to 5.69M pace, above expectations of 5.535M, vs positive revised 5.51M in Dec.
Gold higher at 1239.80 (+4.56). Silver 18.05 (+0.034). Dollar higher. Euro lower. Stocks called easier. U.S. 10-year 2.40% (-3 bps).
USAGOLD/Peter A. Grant/02-21-17
Gold has rebounded from earlier corrective losses after PMI data disappointed. The yellow metal is now trading higher on the day, more than $12 off its intraday low.
The recovery comes despite today’s firmness in the dollar, which in reality is more a function of euro weakness. The single currency has been hit pretty hard by reports that Marine Le Pen’s lead in presidential polls is growing, along with the attendant Frexit fears.
European Commissioner Pierre Moscovici acknowledged on CNBC today that if Le Pen is elected and follows-through on her pledge to take France out of the EU, it “would be the end of the European project.” While Moscovici doesn’t see any chance for Le Pen to win because she “never even ever won a regional election,” but that clearly is not a disqualifier anymore.
Keep in mind that Itexit and Grexit continue to simmer on the back-burner. The former could easily mark the end of the EU as well, but even the latter could be disruptive in the same way that Brexit has been.
A collapse in the euro amidst rising breakup risks would unquestionably send massive flows into the dollar, but gold would likely benefit as well. A further rise in the greenback would present a very serious conundrum for the Fed as well.
“Gold is capped by the likelihood that U.S. monetary policy will be tighter at some stage, potentially in March,” Societe Generale analyst Robin Bhar said.
“There is a lot of political uncertainty, there are safe-haven flows going into gold.”
PG View: These are opposing forces, but the latter seems to be winning out. The yellow metal has rebounded from earlier losses and is now slightly higher on the day, about $12 off the intraday low.
U.S. Market flash manufacturing PMI fell to 54.3 in Feb, below market expectations of 55.4, vs 55.0 in Jan.
U.S. Market flash services PMI fell to 53.9 in Feb, below market expectations of 55.8, vs 55.6 in Jan.
A win for far-right presidential candidate Marine Le Pen would spell the end of the EU – but the French are not crazy enough to let that happen, insists European Commissioner Pierre Moscovici.
“I’m confident. I know my citizens and my compatriots well and know they are not going to elect a candidate who is proposing France exiting (Europe). That would be the end of the European project,” Moscovici, who is European Commissioner for Economic and Financial Affairs, told CNBC Monday.
…”I cannot imagine 50 percent of the French are crazy enough to vote for her,” he said.
PG View: Where have we heard wishful thinking like that before? Moscovici points out that Le Pen has “never even ever won a regional election.” Clearly that’s no long a prerequisite . . .
USAGOLD/Peter A. Grant/02-21-17
Gold has retreated into the range, weighed by higher yields and a stronger dollar. The greenback has been buoyed by revived rate hike expectations and a weaker euro that is sharply lower this morning on rising concerns over a possible Frexit (French exit of the EU).
Philly Fed President Harker said in an MNI interview this morning that he “would not take March off the table at this point.” Meanwhile, European Commissioner for Economic and Financial Affairs, Pierre Moscovici said that the election of Marine Le Pen “would be the end of the European project.”
Frexit would clearly be a much bigger deal than Brexit ever was and markets would be massively roiled. Moscovici went on to add that he “cannot imagine 50% of the French are crazy enough to vote for her.” It seems we’ve heard a number of such prophesies within the last year . . .
Markit manufacturing and services PMI for February is out later this morning. We also will see FedSpeak from Kashkari, Harker and Williams.
Gold lower at 1229.41 (-8.52). Silver 17.93 (-0.139). Dollar higher. Euro lower. Stocks called higher. U.S. 10-year 2.46% (+4 bps).
USAGOLD/Peter A. Grant/02-17-17
Gold is narrowly confined ahead of the long holiday weekend, just below the highs for the year that were set last week at 1244.71. Safe haven interest is still seen as being supportive to the yellow metal, while speculation about a possible rate hike in March may be limiting the upside.
Political uncertainty both in the U.S. and Europe continues to bolster haven interest. There has definitely been a lot more positive press coverage in recent weeks, centered both on the aforementioned political risks and rising concerns about inflation.
Both PPI and CPI for January doubled expectations, suggesting that the Fed’s massive efforts to stoke inflation may finally be baring fruit. It only took about a decade . . .
So, now what’s the Fed’s next move? Do they allow the “overshoot” that has been discussed in more recent years, or do they initiate additional tightening measures at the risk of choking-off the nascent growth prospects?
With growth “quite disappointing” even by Fed Chair Yellen’s estimation, I think they’ll hold in March and hope to see a pickup in GDP by midyear. If June and September start looking questionable, I think the central bank’s already dubious credibility could take another hit.
Additionally, President Trump will likely be moving to fill three vacancies on the Board of Governor within the next several months. I have speculated that given his agenda of tax cuts and debt fueled infrastructure spending, he might be looking to pack the Fed with doves. His recent statements about the dollar being too strong (or other currencies being too weak), plays into this as well.
Nothing would pull the plug faster on the 6-year dollar rally than a policy about-face by the Fed. Or even the message that we won’t tighten any further until the global economy gains momentum and other central banks start removing accommodations.
Economists are worried that Donald Trump’s plan to introduce a so-called border tax on imports could cause a spike in inflation, and rightly so.
The logic here is simple: Lots of goods consumed in the US are made overseas, from Mexico to China. Companies aren’t going to eat the tariffs Trump wants to slap on these — and so they’ll pass on the higher costs to consumers instead.