Author Archives: News

Gold pops after Fed indicates more rate hikes ahead

CNBC/Reuters/2-21-2018

“Gold rose on Wednesday as investors reacted to the minutes of the Federal Reserve’s latest policy meeting for an updated outlook on U.S. interest rates. In the Fed’s minutes released Wednesday, the central bank signaled an increase in economic growth and an uptick in inflation as justification to continue to raise interest rates gradually.”

MK note:  It is the emphasis on the word “gradually” that pushed gold higher initially.  As we have posted here in the past, gradual hikes that lag the inflation rate are bullish for gold, bearish for the dollar.  The gold and dollar markets, at the moment, are erratic – unsure how to react to the minutes release.

UPDATE (1:25pmMT):  Market reaction is emotional, visceral across the boards on what should  have been read as pretty much a non-event.  Shows how unstable, volatile  and erratic the markets really are at this point in time. Many on the professional investor side of the markets will see it as an additional warning (not that the concerns need any more prompting).  Gold now down over $6 on the day, after being up $5. Dollar up.  Stocks down almost 250 from earlier high. The bond market reaction is the most telling.  The 10-year yield is inching toward 3% and we have yet to hear anything on today’s Treasury auction – all in all, probably the more important event of the day.

 

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Silver a top pick in commodities among traders, money managers

ETF Trends/Brenton Garen/2-21-2018

“Heading into 2018, silver was one of the top picks in the commodities complex among traders and money managers. Moreover, unlike gold, silver sees much higher industrial demand. The precious metal enjoys heavy industrial demand that benefits from an expanding global economy. ETF Securities “reiterated its forecast for the precious metal to trade in a range between $19 and 20 an ounce by the end of the year.”

MK note:  And at the current ratio of over 80:1 to gold, silver has the potential to outperform gold.  We have had a steady stream of silver buyers (mostly one-ounce silver American Eagles) at USAGOLD since the stock market breakdown a couple weeks ago.

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Fed presidents Kashkari, Kaplan weigh in on inflation

FED WATCH

“‘We can’t make policy based on market blips, up and down,’ [Neel] Kashkari said. The Minneapolis Fed president, one of the most dovish central bankers, said that he has ‘hope’ inflation is picking up after a decade of being below the central bank’s 2% target. ‘We keep saying inflation is right around the corner and then it disappoints us,’ Kashkari said in an interview on Bloomberg Television. Asked if he would be worried that Wall Street would overreact to higher inflation, Kashkari replied: ‘Wall Street overreacts to everything.'” – MarketWatch, 2-21-2018


“The U.S. central bank should continue to raise short-term interest rate target ‘gradually and patiently,’ said Dallas Fed President Rob Kaplan, on Wednesday, in comments delivered ahead of eagerly awaited minutes. The Fed penciled in three rate hikes for this year but a growing number of economists think the Fed will tighten at a faster pace in the wake of the Trump tax cut and building inflation pressures. In an essay published on his regional bank’s website, Kaplan did not define how many rate hikes would be ‘patient.’” – MarketWatch, 2-21-2018

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Swiss gold exports to China advance sharply during January

Scrap Register/2-21-2018

“Exports to China and Hong Kong picked up by a very considerable 70% year-on-year to total 66 tons, which Commerzbank attributes to higher gold demand ahead of the Chinese New Year Festival. By contrast, January exports to India were only roughly half as high – at a good 14 tons – as they were last January. Last week already saw the Indian Ministry of Commerce report a noticeable decline in gold imports in January. Thomson Reuters GFMS had also talked about weak Indian gold demand.”

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Gold bears play while Chinese away

Sharps Pixley/Lawrie Williams/2-19-2018

“Arguably Chinese gold demand, which remains high according to almost all accounts, tends to be a stabilising influence on the gold price with the twice-daily Shanghai fixes having their own impact is steadying price rises and falls. Thus when the nation goes on holiday for a week, as it is now for the Chinese (Lunar) New Year which was on the 16th, followed by a week-long holiday, it gives gold bulls and bears around the rest of the world a great opportunity to drive the market in their own preferred direction.”

MK note:  Lawrie Williams offers an interesting take on today’s gold market dynamics – one that emphasizes China’s important role as buyers in the contemporary gold market.  If Chinese banks are not available to hit a low bid on physical metal (which they are now capable of doing as members of the London fix), it provides license for gold bears to drive the price lower at least temporarily without being challenged.  If Williams is right, bargain hunters will see these paper trader induced drops as short-term buying opportunities.

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This week’s Treasury auction schedule

TheStreet/Martin Baccadex/2-19-2018

“A big measure of investor willingness to take down the quarter trillion in debt on offer will be be the market’s ability to hold 10-year yields under 3%, a figure that many analysts have suggested could start the flow of cash from equity funds into fixed income portfolios. While no 10-year notes are on offer this week, $92 billion in 2-year, 5-year and 7-year notes will be auctioned on Wednesday and Thursday after more than $151 billion in short-term Treasury bills are placed in the market on Tuesday.”

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Why a new Japanese emperor and the Tokyo Olympics mean a glittering Year of the Dog for gold

The possibility of further falls in stock prices, as well as uncertainty over the strength of the US dollar and over the Brexit process will also add to the lustre of gold this year

South China Morning Post/Enoch Yiu/2-18-2018

‘The Year of the Dog is shaping up to be another good one for investors in gold, who may enjoy price rises of 10 per cent to 15 per cent as Japan buys up the precious metal to commemorate its new emperor and the 2020 Tokyo Olympic Games.”

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India’s gold bar imports jump four-fold

INDIA UPDATE

Scrap Monster/Anil Matthews/2-19-2018

“As per GJEPC [Gems and Jewellery Promotion Council] data, the country imported Rs 2,905.03 crores (USD 456.48 Million) worth of gold bars in January 2018. The imports surged higher significantly when compared with those during the same month a year before. In rupee terms, the gold bar imports have recorded sharp growth of over 320% when matched with the previous year. The increase in dollar terms stood at nearly 350%. It must be noted that the country’s gold bar imports during January 2017 were valued at Rs 690.20 crores (USD 101.38 Million).”

MK note: India is the world’s second largest consumer of gold behind China.

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Olympic medal standings by country

 

 


Gold

Norway – 11
Germany – 10
Netherlands – 6
Canada – 6
United States – 5
France – 4
Sweden – 4
Austria – 4
Korea – 3
Japan – 2
Switzerland – 2
Italy – 2
Slovakia, Czech Republic, Belarus, UK, Poland, Ukraine – 1

Silver
Norway – 9
Germany – 6
Netherlands – 5
Canada – 5
Japan – 5
China – 5
Switzerland – 4
United States – 3
Sweden – 3
Russia – 3
Australia – 2
Austria – 2
Korea – 2
Slovakia – 2
France – 2
Czech Rep – 2
Italy, Belarus, Slovenia – 1

Total Gold, Silver & Bronze

Norway – 28
Germany – 20
Canada – 17
Netherlands – 13
Russia – 11
United States – 10
Japan – 10
France – 10
Austria – 10
Sweden – 7
China – 7
Czech Republic – 6
Italy – 6
UK – 4
Slovakia –3
Australia – 3
Finland – 3
Spain – 2
Latvia, Kazakhstan, Lichtenstein, Slovenia, Ukraine –1

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Goldman Sachs sees red ink everywhere, warns US spending could push up rates and debt levels

CNBC/Javier E. David/2-18-2018

“The U.S. economy won’t be able to count on the pump-priming from tax cuts for very long, Goldman Sachs said on Sunday. Federal spending, rising yields and surging debt needs are a growing worry, the firm said. Deficit spending is approaching ‘uncharted territory’, Goldman said.”

MK note:   Goldman Sachs is beginning to sound like USAGOLD.

Related:  The Federal Debt and Gold – Why the two have risen in tandem since the 1970s, part of our Safe Haven Introductory Information Packet for prospective clients.
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China vows to strike back as US talks tariffs on Chinese steel and aluminium

TRADE WARS

South China Post/Sidney Leng/2-17-2018

“China vowed on Saturday to retaliate after the US Department of Commerce proposed hefty tariffs on imports of Chinese aluminium and steel, with observers warning of further tit-for-tat trade action between the world’s two biggest economies. . . Observers said more confrontation loomed over trade between the two countries and Beijing could respond by limiting imports of American agricultural products.”

MK note:  No mention of selling U.S. Treasuries.

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The stock market’s new ‘wall of worry’ is built on inflation and rate fears

MarketWatch/Anora M. Gaudino/2-18-2018

“‘Seasoned investors will be watching for the retests of the lows. For now, we just added a new wall of worry to climb and that is inflation,’ said Krosby. . .Interestingly, fears of rising inflation and higher borrowing costs—whether rational or irrational—were blamed for triggering the stock market selloff in the first place. ‘We are no longer in the Goldilocks environment, when bad news was good news. Now, the good news is seen as bad news. The market is trying to figure out whether the growth in earnings will keep up with the pace of inflation,’ Krosby said.”

MK note:  ‘Toto, I’ve a feeling we’re not in Kansas anymore.’

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Commerce Department suggests Trump impose steep tariffs or quotas on foreign steel and aluminum

TRADE WARS

CNBC/Kayla Tausche and Lori Ann LaRocco/2-16-2018

“The U.S. Commerce Department recommended heavy tariffs and quotas on steel and aluminum imports, sources say. The recommendations include a 24-percent global tariff on steel imports and a charge of at least 53 percent on steel from a dozen countries. Commerce recommended a 7.7-percent tariff on aluminum imports, with higher tariffs for China, Russia, Venezuela and Vietnam.”

MK note: The markets will have fun sorting out this one. . . .Bottom line:  It’s inflationary.  It threatens the market for U.S. Treasuries.  It ramps up the trade wars to a new level.

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Import prices soar 1% in January

MarketWatch/Jeffry Bartash/2-16-2018

“The import price index leaped 1% in January to add to a picture of rising inflation in the United States. Although the increase was driven by oil, prices rose for a variety of goods such as German cars, French cheese and Italian wine. Excluding fuel, import prices rose a sharp 0.4%, the government said. That’s the biggest increase in six years.”

MK note:  Rising import prices is a major deal for the U.S. economy in that so much of what we use on a daily basis is  imported from other countries.  It will be a major driver of inflation going forward, a drag on the bond market and a longer-term impetus to gold and silver, if the trend holds true over time.

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Bank of Japan’s Kuroda bags a tricky second term

Reuters/Quentin Webb/2-16-2018

“His nomination is a sign that Abe is broadly content with current policy. That involves large amounts of bond-buying, smaller stock purchases, negative short-term rates, and a goal of keeping 10-year government bond yields near zero. There now seems little chance that asset purchases will be reduced markedly anytime soon. Conversely, despite his previous boldness, Kuroda seems loath to experiment further. He has notably ruled out buying state debt directly and holding it forever.”

MK note:  The correlation between gold and the Japanese yen draws the interest of gold owners to the Bank of Japan and its chairman, Haruhiko Kuroda.  Kuroda to a large extent is a Japanese version of Ben Bernanke (think helicopter money).  Somehow, though, the net result of BoJ policy since early 2016 has been a rising yen against the dollar which in turn has accommodated gold’s bias to the upside.  We should add that Japan, as reported yesterday, has been a seller of U.S. Treasuries over the past year – a policy bearish for the dollar and U.S. Treasuries.  So, in short, it obviously remains up in the air, but oddly Kuroda has been good for gold in the evolving monetary mix.

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Dollar hits 15-month low vs yen, some see further slide

Reuters/Masayuki Kitano/2-15-2018

“The dollar extended its losses against the yen and hit a new 15-month low on Thursday, with market participants bracing for further near-term weakness in the U.S. currency. . . .’There’s nothing specific, it’s just a continuation of dollar selling that we’ve seen everywhere overnight, said Tareck Horchani, head of sales trading in Asia Pacific for Saxo Markets in Singapore.'”

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Olympic medal standings, by country

 

 


Gold

Norway – 11
Germany – 10
Netherlands – 6
Canada – 6
United States – 5
France – 4
Sweden – 4
Austria – 4
Korea – 3
Japan – 2
Switzerland – 2
Italy – 2
Slovakia, Czech Republic, Belarus, UK, Poland, Ukraine – 1

Silver
Norway – 9
Germany – 6
Netherlands – 5
Canada – 5
Japan – 5
China – 5
Switzerland – 4
United States – 3
Sweden – 3
Russia – 3
Australia – 2
Austria – 2
Korea – 2
Slovakia – 2
France – 2
Czech Rep – 2
Italy, Belarus, Slovenia – 1

Total Gold, Silver & Bronze

Norway – 28
Germany – 20
Canada – 17
Netherlands – 13
Russia – 11
United States – 10
Japan – 10
France – 10
Austria – 10
Sweden – 7
China – 7
Czech Republic – 6
Italy – 6
UK – 4
Slovakia –3
Australia – 3
Finland – 3
Spain – 2
Latvia, Kazakhstan, Lichtenstein, Slovenia, Ukraine –1

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China currency policy may be facing a new chapter

Bloomberg/Yinan Zhao, Kana Nishizawa, and Justina Lee/2-14-2108

“In the fraught history of Chinese currency policy, a new chapter could be looming this year as authorities consider the consequences of a yuan that’s testing its strongest levels since mid-2015. After successfully shutting off potentially destabilizing capital outflows and putting a floor under the yuan, policy makers may now have the luxury of looking at relaxing some of the strictures on domestic money. But China watchers warn that any moves are likely to be gradual and calibrated, given the turmoil of 2015 — when a sliding yuan spooked global markets.”

MK note:  A heads up on China’s yuan policy worth keeping in mind. China wants to control capital flow by keeping the yuan reasonably strong and encourage exports by keeping the yuan reasonably weak – yin and yang.  Meanwhile, the official policy top to bottom in Chinese society will be to accumulate physical gold. . .and increasingly silver – a no-nonsense  approach to sovereign portfolio design.

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Gold surges higher, dollar tanks

UPDATE

Gold surged higher at the close of COMEX trading, up $21 at $1353.00.  Initially the market was driven by strong buying on the inflation jolt.  It looks like technical buying and short covering came into the market towards the end of the session – a sign that the shorts feel a need to liquidate their positions.  Similarly, and inversely, the dollar took an initial dive, steadied then dropped again precipitously. Looks like we are heading toward the biggest single-day gain for gold in 2018. . . . . .MK

 

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U.S. stock market battles to shake off morning jolt from inflation data

MarketWatch/Victor Reklaitis and Anora M. Gaudiano/2-14-2018

“Inflation scares that were responsible for the stock-market tumble over the past few weeks made a brief appearance on Wednesday with the release of consumer-price index data. But the main equity gauges recovered from the initial shock to trade higher. The cost of rent, clothes, gasoline, health care and auto insurance all rose, contributing to the 0.5% jump in the consumer-price index. Core inflation, which strips out volatile food and energy prices, rose by 0.3%. Analysts said stronger inflation data may force the Federal Reserve to be more aggressive in tightening policy.”

MK note:  Not sure that the speculators have had their final say on the inflation numbers – the quiet stock market fits neither the uncertainties generated by the news, nor the more visceral reaction in other markets.

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Saxo Bank says volatility focus pushing major geopolitical risks to background

Saxo Bank/Steen Jakobsen/2-13-2018

“The market is so focused on NASDAQ volatility that a lot of geopolitical risk is being ignored: Israel and Iran are now directly facing off each other,  whereas in the past it was through a proxy: Haaretz – After years of covers proxy wars, Iran shifts to direct contact with Israel.”

MK note:  In general, the temperature is rising in the Middle East, including troubling reports of U.S.-Russia encounters in Syria, as reported today in the New York Times.

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Credit Suisse believes central banks are selling off their dollar reserves

ExchangeRates.org.uk/Francois Aure/2-14-2018

“Appetite for the US Dollar has certainly waned in recent months as the more hawkish ECB has prompted institutions and funds to scoop up the potentially undervalued Euro and dump some of the Dollar, who’s bullish trend over the last few years has looked increasingly tired as other Central Banks have adopted a more hawkish approach. Economists at Credit Suisse released a report on Central Bank activity in Asia, where they have seen a number of major banks trimming their Dollar reserves . . “

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Dalio’s Bridgewater boosts gold holdings in SPDR, IShares

Bloomberg/Luzi-Ann Javier/2-13-2018

“Billionaire hedge fund manager Ray Dalio boosted his holdings in the two largest gold-backed ETFs last quarter before prices of the metal capped the biggest annual gain in seven years. . . .In August, Dalio recommended investors consider placing 5 percent to 10 percent of their assets in gold, citing political and economic risks.”

Related: Dalio – [T]he dollar’s role as the dominant world currency is an anachronism/ MKS&S/ 1-25-2018
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U.S. Treasury finally updates the national debt number . . . .

MK note: . . . . . adding $179 billion to the accumulated federal debt in two days. Treasury had not updated the national debt figure all year due to restraints placed on borrowing until after the president signed the budget bill February 8th. The total amount, as you can see in the Treasury table below, blew past the $20.5 trillion mark to stand at

$20,673,916,370,594.86


Related:  The National Debt and Gold – Here’s why the two have risen together since the 1970s and why the correlation is likely to continue/Inclusion, USAGOLD Safe Haven Investor Introductory Information Packet

 

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Powell says Fed alert to any developing financial risks

Bloomberg/Rich Miller/2-13-2018

“‘We will remain alert to any developing risks to financial stability,’ he [Fed chairman Jerome Powell] said Tuesday in the text of remarks in Washington at his ceremonial swearing-in. ‘We are in the process of gradually normalizing both interest rate policy and our balance sheet with a view to extending the recovery and sustaining the pursuit,’ of its twin statutory goals.”

MK note:  On the job. . . Nothing earth-shaking here but a public commitment to a continuation of Fed policies instituted under Janet Yellen. . .at least for now.

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Rattled by U.S. fiscal, monetary tug-of-war, investors start looking abroad

Reuters/David Randall/2-13-2018

“The turmoil stems from a tug-of-war between monetary and fiscal policies: The Federal Reserve, which is mandated to keep inflation low and stable, and U.S. fiscal policy, which is adding stimulus with a $1.5 trillion Republican-led tax cut and an extra $300 billion over two years in federal spending as the central bank unloads bonds from its balance sheets. . .Underlying the push outside of U.S. assets is a fear of rising inflation, after years of ultra-loose monetary policy.”

MK note:  With this mentality in play, one would think that some of that loose capital would make its way to the gold market.

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U.S. CPI report takes on bigger importance after markets plunge

Bloomberg/Katia Dmitrieva/2-13-2018

“Wednesday’s report on the U.S. consumer price index will be the most closely watched in recent memory, with investors seeking to understand the recent plunge in the stock and bond markets. They’ll probably need to look beyond the main numbers for the full story.”

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Asia, Europe stocks drift down overnight

DJIA overnight trading implies open down 210. . . .A reversal from yesterday’s more than 400 point gain if current levels hold.

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Gold ETF holdings post weekly decline of 21 tons

Scrap Register/2-12-2018

“The slide in gold prices last week was accompanied by pronounced outflows from global exchange-traded funds, including 6.5 tons on Friday, said Commerzbank in a snippet. ‘The gold ETFs tracked by Bloomberg decreased by a good 21 tons last week, thereby reversing the lion’s share of the inflows seen since the start of the year,’ Commerzbank added.”

MK note:  Evidence that hedge funds and institutions were liquidating ETF gold holdings to cover requirements in other aspects of their book.

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Investors brace for more swings as U.S. inflation specter rises

Reuters/Chuck Mikolajczak/2-11-2018

“Next week, coming off one of the most volatile stretches in years, two important readings on U.S. inflation could help determine whether the stock market begins to settle or if another bout of volatility is in store. If the January’s U.S. consumer price index due next Wednesday from the U.S. Labor Department, and the producer price index the next day, come in higher than the market anticipates, brace for more selling and gyrations for stocks.”

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