“In a stinging and historically rare criticism, President Donald Trump expressed frustration with the Federal Reserve and said the central bank could disrupt the economic recovery. Presidents rarely intercede when it comes to the Fed, which sets the benchmark interest rate that flows through to many types of consumer debt.”
USAGOLD note: The gold price is moving higher on this news – as it stands at the moment, retracing most of today’s downside . . . . .We have consistently pointed to hawkish Fed interest rate policy in contrast to dovish policies across either ocean as the driving force behind the strong dollar (up to yesterday’s MarketWatch comments) That policy, if continued, could nullify the Trump agenda especially with respect to reducing imports and raising exports. It is not surprising the president would call out the Fed on the matter. In fact, I am surprised it didn’t happen sooner.
“Gold falls to lowest level in a year, but this may be a time for contrarians to buy. A record 17 percent of fund managers in Bank of America Merrill Lynch’s monthly survey said they see gold as undervalued. Bank of America says this could make gold a buy for contrarian bears, who could also sell out of the overcrowded tech sector.”
USAGOLD note: Make that a record number of institutional investors. . . .
“The inflation rate in the US edged up to 2.9 percent in June of 2018 from 2.8 percent in May, matching market expectations. It is the highest rate since February of 2012 when inflation was also at 2.9 percent. Inflation was higher only in December of 2011 when it reached 3 percent. On a monthly basis, prices increased 0.1 percent, lower than 0.2 percent in May and forecasts of 0.2 percent. Prices of shelter, gasoline, and food made the main upward pressure.”
USAGOLD note: We should keep in mind that this month’s CPI release reflects pressure from rising oil prices but it is too early for tariff measures to have an effect. If and when those effects surface, it will be on top of what rising oil prices are already generating.
“The Federal Reserve next March will probably map out an end to the contraction in its balance sheet, helping support longer-dated bond yields, which will drop below those on shorter-dated notes by the middle of 2019, according to Morgan Stanley.”
USAGOLD note: The question routinely overlooked in the discussions about the yield curve is why the longer-dated bonds yields are stuck in the first place. Who’s the buyer keeping yields artificially low? Or is it a lack of supply? And while that influence remains in place, whatever is causing it, is the idea that an inverted yield curve signals a recession subverted by some hidden and unexplained circumstance?
From a CNBC article two days ago: “One thing we have to reconcile is what’s unique about this environment is we just went through a long period of QE [quantitative easing] to keep rates lower than normally would be the case. Most estimates for QE would argue the curve is probably on the order of about 40 to 50 basis points flatter than it normally would be,” he (Morgan Stanley’s Jim Carron, fixed income portfolio manager) said. “The flatness of the yield curve is instead a weaker signal about a recession than it has been in the past because of all these QE factors.”
Bloomberg/Miao Han, Zinan Zhao nad Xisoqing Pi/7-13-2018
“China’s monthly trade surplus with the U.S. rose to a record in June, underlining the imbalance at the heart of an escalating trade war between the world’s two largest economies. The trade surplus with the U.S. stood at $28.97 billion, the highest in any month in data back to 1999. Exports climbed to $42.62 billion, also a high, the customs administration said on Friday.”
FOREX Closes: Gold $1247.70 (+$4.57) / Silver $15.97 (+11¢)
MarketWatch/Myra P. Saefong and Mark DeCambre/7-12-2018
“‘The U.S. economic data brought weakness in the dollar index and this has helped the gold price,’ said Naeem Aslam, chief market analyst at Think Markets. ‘Moreover, we do believe that trade tension (to some extent) is also providing some momentum for gold.’”
New York Times/Alexandra Stevenson/7-11-2018
“President Trump’s escalating trade war with China rattled global markets on Wednesday. China led a market tumble in Asia and Europe, with stocks there finishing the day down nearly 2 percent, after the Trump administration threatened to impose new tariffs on Chinese goods. Stocks in Japan and South Korea also fell, though by less.”
USAGOLD note: Dow futures are down about 200 and gold is down about $5. . . .
CreamerMedia’s Mining Weekly/7-11-2018
“Prestige Bullion, a joint venture between Rand Refinery and the South African Mint, will, from August 1, sell 1 oz silver bullion Krugerrands. The silver Krugerrand will be produced in unlimited mintage, dependent on market appetite and linked to the daily price of silver. The introduction of the silver bullion Krugerrand marks the first time in its 51-year history that the Krugerrand is produced in a metal other than 22 ct gold in unlimited mintage.”
“China vowed to fightback against the Trump administration’s plans to impose tariffs on an additional $200 billion in Chinese goods, escalating a trade war between the world’s two biggest economies.”
USAGOLD note: Some commentators have likened the worsening trade war between the US and China to the early stages of World War I. Leaders and pundits then believed that tensions would not evolve to a full-blown military conflict because too much was at stake economically among European states. Most believed if that if tensions did evolve to a hot war, it would be brief. They were wrong. We are a long way from drifting into a repeat of that tragic history, but short of a military conflict, the current trade war itself seems to have taken on a life of its own – and that is troubling.
FOREX Closes: Gold $1256.00 (– $2.78) / Silver $16.07 (-7¢)
Gold prices were pushed lower Tuesday by higher U.S. government bond yields and a rising dollar, which also dented sentiment on other metals. . .Investor appetite for safe heavens such as gold, yen and Treasuries, were scaled back by sentiment for riskier assets, triggering an uptick in U.S. bond yields and forcing gold prices lower.”
USAGOLD note: Gold showed some resilience overnight reversing sharply off a $1248 low in Europe to finish the day in the U.S. at $1256.00.
Bloomberg/Rich Miller and Vince Golle/7-10-2018
“A multi-colored graphic that’s made the rounds at the Federal Reserve hints at what Chairman Jerome Powell could face if President Donald Trump succeeds in throwing globalization into reverse: Higher prices for many goods and potentially faster inflation.”
USAGOLD note: We alluded to this situation yesterday. Cheap imports have kept inflation in check for at least the past decade. The tariff and sanction programs global imports will likely remove that positive influence on prices.
FOREX Closes: Gold $1258.10 (+3.10) / Silver $16.12 (+7¢)
Reuters/Renita D. Young and Eric Onstad/7-9-2018
“Gold rose on Monday, touching its highest in two weeks as the dollar weakened and the Chinese yuan recovered from June’s lows, and gold stayed higher even as the dollar bounced up, as some investors bought bullion to cover short positions. “
USAGOLD note: Gold tracked down most of the day from highs achieved in Asia and Europe overnight. We invite you to scroll below for more information on today’s market action and what’s affecting the gold market.
Bloomberg/Andrew Mayeda and Jenny Leonard/7-8-2018
“Economists feel they have a good handle on the direct impact of higher duties. Tariffs raise the price of imported goods, in turn inflating costs for businesses. Those companies can fully absorb the increased cost, or pass some or all of it onto consumers. The bottom line: someone pays, prices rise, demand is hurt.”
USAGOLD note: In other words, the effects are likely to creep up on us. This week the government will release its reports on producer prices and consumer prices. Though it is probably too early for the tariffs to affect these reports, investors are likely to see any signs of rising inflation as a trend to which the cost of tariffs will need to be added. We need to keep in mind that cheap imports have been the chief contributor to low inflation in the United States for at least over a decade – going all the way back to Greenspan’s tenure as Fed chairman. Companies, by the way, will pass along the rising costs. They will have no choice especially in this era of razor thin margins for retailers as well as wholesalers.
Bloomberg/Jake Lloyd Smith and Krystal Chia/7-4-2018
“Commodity bull Goldman Sachs Group Inc. has poured cold water on the notion that a trade war between the U.S. and China represents a serious threat to raw materials, saying most of them aren’t likely to be significantly impacted, and after recent declines now’s the time to buy.”
USAGOLD note: As go commodities, so goes gold. . . . . . . .Recent reports put gold demand in China at 1000 tonnes for the first half of 2018. Its consumption is right at last year’s levels – an indication that the trade war has not affected imports of the metal. That number also represents about one-third of annual global mine production.
“U.S tariffs on $34 billion worth of Chinese goods will kicked in on Friday morning. Another $16 billion are expected to go into effect in two weeks, President Donald Trump said on Thursday. Trump’s statements reinforce earlier threats that he would escalate the trade conflict if Beijing retaliates.”
USAGOLD note: Trump fires opening salvo, threatens to go nuclear if China retaliates. China immediately retaliates calling it the “biggest trade war in economic history.” And so it begins. . . . . . . . . .
FOREX Closes: Gold $1257.69 (+5.20) / Silver $16.02 (+3¢)
MarketWatch/Mark DeCambre and Myra Saefong/7-5-2018
“August gold , +0.42% rose $5.30 or 0.4%, to settle at $1,258.80 an ounce—the highest finish since June 26, according to FactSet data. The move follows a 1% Tuesday rebound that helped the yellow metal claw back some losses that drove futures to the lowest levels of 2018. For the week, bullion prices traded 0.6% higher. The most popular fund tracking gold, the SPDR Gold Shares GLD, +0.34% meanwhile, was up about 0.3% this week.”
USAGOLD note: Please see our Daily Market Report further down the page for additional information on today’s market activity.
“President Donald Trump is preparing to slap tariffs on Chinese goods early Friday, the first shot in a trade war between the world’s two biggest economies. Tariffs on $34 billion of Chinese goods are scheduled to take effect at 12:01 a.m. in Washington, the U.S. Trade Representative confirmed in an email Thursday. The milestone marks a new and damaging phase in a conflict that has roiled markets and cast a shadow over the global growth outlook.”
USAGOLD note: China, we remind our readers, has promised to retaliate with sanctions of their own.
“. . .the current trade rumble between the U.S. and China, in which the Trump administration is threatening to slap tariffs on $34 billion of Chinese imports and Beijing promises to respond in kind, is far more than just a spat over market restrictions, intellectual property rights and the epic U.S. deficit.”
FOREX Closes: Gold $1252.98. (+$11.07) / Silver $16.01 (+20¢)
Reuters/Renita D. Young and Zandi Shabalala/7-3-2018
“‘First the dollar flipped, and it looks like interest rates dropped for the 10-year (Treasuries),’ said Bart Melek, head of commodity strategy at TD Securities. “The (yield) curve is flattening, suggesting that you might not get as much tightening as thought before.’ Investors awaited minutes, due on Thursday, of the June U.S. Federal Reserve meeting and U.S. non-farm payrolls data on Friday for clues on the direction of U.S. monetary policy decisions, which affect non-interest yielding gold.”
USAGOLD note: Please see our Daily Market Report further down the page for additional information on gold’s move to the upside today.
Financial Times/Gabriel Wildau in Shanghai/7-3-2018
“The onshore renminbi fell 0.8 per cent against the US dollar in early trading — its fourth-biggest intraday drop — but by late afternoon had pared losses to 0.3 per cent, a move that traders attributed to state banks aggressively buying the currency. The Chinese currency’s 3.3 per cent tumble in June was its worst month ever.”
USAGOLD note: A quick study in cause and effect. . . . . .It should be mentioned that the PBoC’s announcement overnight (mentioned in this morning’s DMR) reflects China’s concern about capital flight. China is in a position to deal directly with yuan weakness as displayed in the visualization immediately on forex reserves. Other countries are not as well situated and therefore cannot defend their currencies and prevent capital flight like China.
“With gold prices down at six-month lows, Chinese buyers have been very assertive of late. Turnover on the Shanghai Gold Exchange’s gold contract has been 11.5% higher in the last 10 days, compared to the same period in 2017.”
USAGOLD note: According to Mitsubishi report
FOREX Closes: Gold $1242.31 (-$10.60 / Silver $15.86 (-20¢)
MarketWatch/Myra P. Saefong and Koning Beals/7-1-2018
“’The excuse for gold being down so much starts with the dollar, but I suspect there are some gold bulls throwing in the towel, which may be exacerbating gold’s weakness,’ said Michael Armbruster, managing partner at Altavest. Even so, he said he ‘would not be surprised to see a big gold rally in the near future’—possibly a gain of $50 an ounce.”
“Major Asian markets closed sharply lower on Monday, the first trading day of the second half of the year, as heavy losses were recorded in China ahead of a looming deadline when tariffs from both Washington and Beijing are expected to take effect.”
USAGOLD note: The selling in European stock markets was not as pronounced. Wall Street looks to open down about 130 as this posted. “Hostile trade talk” blamed.
Financial Times/Chris Flood/6-30-2018
“Increasing concern about the effect of a possible trade war between the US and China has forced investors in equity funds to head for the exits. Investors pulled $29.7bn from equity funds in the week ended June 27, the second largest weekly outflow since the beginning of the millennium, according to data provider EPFR.”
USAGOLD note: A warning shot across the bow of global stock and bond markets?
Reuters/Francesco Canepa, Frank Siebelt and Thomas Escritt/7-1-2018
“The next head of the European Central Bank must be someone who can tighten the money taps after years of crisis-fighting and stimulus, the head of the Bundesbank Jens Weidmann said in a radio interview on Sunday.”
USAGOLD note: Two thoughts. First, Weidmann’s comments represent an undertow within the ECB favoring a tighter monetary policy. That said, these comments alone are not likely to have a profound effect on the euro-dollar rate. Second, Weidmann is generally considered the odds-on favorite to replace Mario Draghi in late 2019, so his views carry considerable weight.
FOREX Closes: Gold $1252.91 (+$4.82) / Silver $16.06 (+9¢)
London South East/Alliance News/6-29-2018
“Gold futures rose Friday, snapping a four-day losing skid as traders weighed a flurry of economic news from around the globe. After hitting a 7-month low, gold for August rose USD3.60 to USD1254.60 an ounce.”
Financial Times/Claire Jones/6-29-2018
“The surge in the price of oil has pushed eurozone inflation above the European Central Bank’s target, but policymakers in Frankfurt are expected to ignore the rise as broader price pressures across the region remain weak.”
USAGOLD note: It is interesting to note that both the United States and Europe reported inflation numbers above target based on surging oil prices. Brent crude is surging again today – up $1.61 at $79.40 and in a solid uptrend for the past year that the gold market has ignored.
Bloomberg/Tian Chen, Eric Lamm and Anooja Debnath/6-27-2018
“Global investors might shrug at a bear market in Chinese domestic stocks — largely walled off from the rest of the world. But a tumble in the yuan that’s blindsided currency forecasters is now triggering warnings of potential contagion.”
USAGOLD note: This article is worth reading for the comments from front-line currency traders in the trade wars.
Financial Times/Najmeh Bozorgmehr/6-26-2018
“Hundreds of merchants in the vaulted streets of Tehran’s Grand Bazaar have shut down their shops this week in protests against a sliding currency that allies of Hassan Rouhani, Iran’s centrist president, say are being whipped up by hardliners to push him out of office.”
USAGOLD note: This article cites one shopkeeper as saying that “people buy only basic commodities these days or turn their savings into gold coins.” We draw your attention to this situation in Iran only because it is symptomatic of what might happen around the world should the emerging countries’ debt and currency crisis accelerate. Iran and Turkey, another country where heavy gold coin has been reported in the face of a currency crisis, are two among dozens of similarly situated countries. With the sheer number of countries and people potentially involved, the demand for physical gold could actually accelerate to levels that it would move the price.