Author Archives: News

The Daily Market Report: Gold Firms Modestly


USAGOLD/Peter Grant/06-22-17

Gold is modestly higher, having stabilized above the 1241.30/1235.82 support zone (trendline/200-day moving average). Some additional upside follow-through above the 1261.78 retracement level would be encouraging and help confirm that the pattern of higher-highs and higher-lows that has been evident so far this year, is still intact.

The Senate rolled out their secret healthcare reform legislation this morning. The accompanying headlines immediately indicated it did not have the votes to pass. The CBO hopes to score the legislation by next week, right before the Independence Day recess. That will give them just 3-weeks to negotiate and pass the reform before the month-long August recess.

There is talk about forgoing the August recess, but as long as this major piece of the President’s agenda is unresolved, everything else is probably on the back-burner. If that’s the case, markets are likely to get pretty restless by the final quarter of the year is there is no real progress on the fiscal front.

The DJIA is up about 17% since election day, based largely on expectations of deregulation, healthcare reform, tax reform and infrastructure spending. If none of that is actually happening by the end of summer, arguably a 15% decline to those election-day levels would make a lot of sense. That would put the Dow near bear market territory.

Failure to advance President Trump’s economic agenda would likely make the Fed rather nervous as well. They’re talking like they really want to raise rates again in September, but the market is just not buying it. If fiscal policy remains bogged down, I would expect the Fed to soften their hawkish tone.

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

Sears Canada files for bankruptcy

CNNMoney/Chris Isidore/06-22-17

Sears Canada filed for bankruptcy early Thursday, making it the latest casualty of the crisis among traditional brick-and-mortar retailers. It’s also another sign of trouble for the iconic retailer.

Sears Canada, which has more than 200 stores and about 17,000 employees, was spun-off as an independent company in 2012. But the filing is still bad news for Sears Holdings (SHLD), which owns both the Sears and Kmart brands in the United States. Sears Holdings still owns 12% of its shares.

…Sears and Sears Canada are hardly the only struggling retailers. In the United States, retail bankruptcies are up about 30% so far this year, according to BankruptcyData.com. Well known names including RadioShack, Gymboree, Sports Authority and Payless Shoes have all filed for bankruptcy within the last year. Total store closings across the U.S. are likely to reach record levels this year.

By some estimates, 25% of U.S. malls could close within the next five years.

PG View: Jonathan and I discussed this developing crisis in depth back in May. You can see the video HERE.

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Posted in Economy |

U.S. leading indicators +0.3% in May, in line with expectations, vs negative revised +0.2% in Apr.

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Posted in Economic Data |

One striking chart suggests the Fed is making a big mistake

BusinessInsider/Pedro Nicolaci da Costa/06-22-17

The Federal Reserve keeps telling the bond market it wants interest rates to move higher, but traders aren’t listening.

That suggests investors don’t believe the Fed’s justification for interest rate increases, which are predicated not only on recent economic improvement but also on a continued bright outlook.

One startling chart from Societe Generale’s Albert Edwards illustrates the Fed’s dilemma. Two-year notes are historically the maturity that is most responsive to moves in the official federal funds rate.

But look at what’s happened to the two-year note’s yield this year as the Fed ratcheted up its monetary tightening campaign. Absolutely nothing.

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Posted in Central Banks, Economy, Monetary Policy |

Dollar five-year super-cycle is over: Barclays


Reuters/Patrick Graham/06-22-17

Rises in U.S. interest rates will probably prop the dollar up over the next 18 months, but its multi-year run higher since 2012 looks to be over, strategists from British bank Barclays said in a note on Thursday.

…”We believe the USD super-cycle of the past five years is over: the cyclical divergence that helped the dollar in these years has likely peaked, not only because of the European recovery, but also because the U.S. business cycle is more advanced than in Europe,” Barclays said in an updated global outlook dated June 22.

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Posted in U.S. Dollar |

U.S. FHFA home price index rose 0.7% to 248.3 in Apr, above expectations of 247.5, vs positive revised 246.6 in Mar.

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Posted in Economic Data |

Morning Snapshot: Gold edges higher

USAGOLD/Peter Grant/06-22-17

Gold is modestly higher after the recent string of losses stalled shy of trendline support and the 200-day moving average. A slightly lower dollar and a host of uncertainties in the the economic, political and geopolitical realms are all helping to underpin the yellow metal.

Initial jobless claims edged higher last week. FHFA home price index rose in April. We’ll see leading indicators for May and M2 for last week later this morning, as well as FedSpeak from Governor Powell.

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Posted in Gold News, Gold Views, Snapshot |

Norges Bank Abandons All Talk of Easing as Oil Crisis Fades

Bloomberg/Sveinung Sleire/06-22-17

Norway’s central bank signaled that it has finished cutting interest rates amid signs the economy weathered the collapse of its oil industry over the past three years.

As anticipated, Norges Bank kept its key policy rate at a record low of 0.50 percent, where it’s been since March 2016. It revised its rate path higher, eliminating the probability of a future cut, and penciled in a first increase at the beginning of 2019. The krone jumped 0.6 percent to 9.46 per euro.

PG View: They may prove to be a bit premature in calling the oil crisis over . . .

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Posted in Central Banks, Monetary Policy |

RBNZ Holds Rates at Record Low, Shrugs at Currency’s Gain

Bloomberg/Matthew Brockett/06-21-17

New Zealand’s central bank kept interest rates at a record low and indicated it won’t raise them anytime soon. The currency rose after the bank failed to complain about its recent strength.

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Posted in Central Banks, Monetary Policy |

U.S. initial claims +3k to 241k in the week ended 17-Jun, above expectations of 240k.

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Posted in Economic Data |

Gold higher at 1253.60 (+4.39). Silver 16.64 (+0.132). Dollar easier. Euro better. Stocks called mixed. U.S. 10-year 2.16% (-1 bp).

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Posted in Markets |

NATO jet approached plane carrying Russian defense minister, reports say

WaPo/Andrew Roth/06-21-17

A NATO F-16 fighter approached and was then warned away from a jet carrying Russia’s defense minister, Russian media reported Wednesday, the latest in a string of aerial incidents that have marked rising tensions between the West and Russia.

The incident occurred over the Baltic Sea in northeastern Europe, according to reporters traveling with Defense Minister Sergei Shoigu, in international airspace crowded with Russian and NATO jets testing one another’s nerve in sometimes dangerously close proximity.

But no incidents yet had involved aircraft with high-ranking Russian or U.S. government officials on board.

PG View: The provocations seem to be intensifying. One mistake or overreaction could lead to a major escalation.

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Posted in Geopolitical Risks |

The Daily Market Report: Gold Eying Support Just Below the Market


USAGOLD/Peter Grant/06-21-17

Gold has turned more consolidative, having perhaps found support ahead of trendlines and the 200-day moving average. After closing lower in 8 out of the last 10 sessions, the yellow metal was arguably oversold on a short-term basis and is due for a bounce.

Despite continued firmness in the stock market and assurances from the Fed that all is well, there remains an underlying air of uncertainty that is helping to underpin the yellow metal with some safe-haven interest. That uncertainty may be springing from an economy that simply is not firing on all cylinders. Or perhaps it’s the heightened geopolitical tensions or a President that has been hamstrung in forwarding his economic agenda. Maybe all of these factors are weighing on sentiment.

Some heavy hitters in the market are issuing their own words of caution:

Oil prices remain a significant area of concern as well. WTI continues to tumble, reaching new 7-month lows below $42.50, despite bigger than expected inventory draws. Crude remains on track for a drop back to $40. Below that, the 13-year low from last year at $26.06 would have to be considered back in play.

Historically, lower energy prices were thought to be a boon for the economy. In recent years however, that effect has been muted at best and nonexistent at worst. And that too suggests there is some underlying systemic weakness that simply can not be reversed with easy money and cheap energy.

When that systemic weakness manifests into a recession, it may end up being far worse than the Great Recession of 2007/2008. The severely frothy stock market may indeed end in tears. Prudent investors might consider legging out of equity exposure and moving into undervalued gold.

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

Oil resumes plunge, despite bigger than expected EIA draw. WTI establishes new 7-month low of 42.49.

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Posted in Markets |

Shanghai Gold Exchange to offer yuan-back futures contract in Budapest


South China Morning Post/Maggie Zhang/06-21-17

China is looking to expand the use of its yuan-denominated gold fix overseas, the chairman of the mainland China’s sole gold bourse said on Wednesday, reflecting on Beijing’s attempt to vie for a bigger say in the price-setting of the precious metal.

It is now expected that a gold futures contract based on China’s yuan-backed gold benchmark price could be listed on the Budapest Stock Exchange in Hungary as soon as the second half of this year, said Jiao Jinpu, chairman of the Shanghai Gold Exchange (SGE) at the Lujiazui Forum, which ends in Shanghai on Wednesday.

SGE is considered the world’s largest physical bullion exchange.

PG View: China continues to expand its influence over global price discovery for gold.

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Posted in Gold News, Gold Views |

U.S. existing home sales +1.1% to 5.62M pace in May, below expectations of 5.54M, vs negative revised 5.56M in Apr.

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Posted in Economic Data |

Morning Snapshot: Gold maintains defensive tone

USAGOLD/Peter Grant/06-21-17

Gold is maintaining a generally defensive tone, edging once again to 5-week lows on weak momentum. A firm dollar and stocks are weighing on the yellow metal, while a myriad of economic, political and geopolitical risks provide underpinning to the market. I’m watching support marked by the 200-day moving average at 1236.12.

With recent FedSpeak echoing the hawkish tone of last week’s policy statement, traders are still unwinding some of their short dollar exposure. Those short positions were predicated on an expectation that the Fed would take a more dovish tone in the wake of recent weak data.

That didn’t happen. If fact, the Fed arguably turned more hawkish in an effort to keep a September hike on the table.

May existing home sales and EIA crude data are on the calendar for later today.

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Posted in Gold News, Gold Views, Snapshot |

BOJ’s Kuroda: need to stick with easing, watch price trend

Reuters/Stanley White/06-21-17

Bank of Japan Governor Haruhiko Kuroda said maintaining the current easy monetary conditions is appropriate because prices are lagging improvements in the economy and remain distant from the central bank’s inflation target.

…”Our economy is on firmer footing, but we are still distant from our 2 percent inflation target,” Kuroda said.

“It is appropriate to keep monetary conditions easy with our current market operations framework.”

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Posted in Central Banks, inflation, Monetary Policy |

Gold easier at 1243.86 (-1.28). Silver 16.43 (-0.094). Dollar lower. Euro higher. Stocks called mixed. U.S. 10-year 2.17% (+2 bps).

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Posted in Markets |

The Daily Market Report: Gold Edges Lower As FedSpeak Dismisses Concerns Over Waning Inflation


USAGOLD/Peter Grant/06-20-17

Gold edged to a new 7-week low, but the tone today is broadly consolidative. The yellow metal is underpinned, despite continued gains in the dollar.

The dollar index pushed to a 6-week high, as recent FedSpeak has struck a hawkish tone that is consistent with last week’s more hawkish than expected Fed policy statement. They are clearly trying to boost rate hike expectations for September; if for no other reason, to keep that option on the table.

Right now, the market is not buying it. Fed funds futures put the probability of a September rate hike at just 12.8%. The yield on the the 10-year note is 2.15%, down 30 bps from the beginning of the year amid mounting concerns about waning inflation pressures.

“I will say that the most recent inflation data made me a little nervous,” Chicago Fed President Charles Evans conceded today. However, most recent FedSpeak has been rather dismissive about inflation, even as oil prices continue to tumble.

Today’s drop in WTI below $43 clears the way for a challenge of $40. Given that energy prices are such a major input into the broader economy, the Fed should be more than a little nervous.

Evaporating inflation pressures may be providing some of the recent weight on gold, as the post-election reflation trade continues to get unwound. One should however keep in mind that gold is also a very effective hedge in times of disinflation, deflation and stagflation as well. Please see our special report on this topic by clicking HERE.

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

LAWRIE WILLIAMS: Russia adds another 21.8 tonnes to gold reserves in May


Sharps Pixley/Lawrie Williams/06-20-17

When we reported on last month’s comparatively small increase in Russia’s gold reserve in April of only 6.2 tonnes (See: Sharp drop in Russia’s gold reserve increase in April) we commented at the time that perhaps not too much should be read into this monthly fall in volume of reserve increases as being indicative of a slowing down of gold purchases yet, as the nation’s monthly reported increases can fluctuate substantially. Now the May figures are in we can see that we were correct as Russian gold reserves increased that month by some 700,000 ounces (21.8 tonnes) bringing the grand total of its reported gold reserves to around 1,708 tonnes. This keeps Russia in sixth place among global national holders of gold after China in fifth, but closing the gap given China seems to have ceased to report monthly gold reserve increases since last October. If this non-reporting by China continues and Russia continues to add to its reserves at the current rate then by the year end the gap between the two nations’ reported reserves to the IMF could be as little as 10 tonnes, or perhaps even less.

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Posted in Gold News, Gold Views |

Fed’s Evans says he’s nervous about inflation weakness

Reuters/Lindsay Dunsmuir/06-20-17

Chicago Federal Reserve Bank President Charles Evans said on Tuesday he is increasingly concerned that a recent softness in inflation is a sign the U.S. central bank will struggle to get price pressures back to its 2 percent objective.

“I will say that the most recent inflation data made me a little nervous about that. I think it’s much more challenging from here on out,” Evans said in an interview with broadcaster CNBC.

…If inflation remains in a slump, the Fed may require a shallower path of rate rises, he added.

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Posted in Central Banks, inflation, Monetary Policy |

Oil prices are tumbling more than 2% to $43 a barrel right now

CNBC/Tom DiChristopher/06-20-17

Oil prices continued to search for a bottom on Tuesday, falling more than 2 percent to fresh seven-month lows on signs of rising production in key parts of the world.

U.S. West Texas Intermediate crude oil futures were last down $1.19, or 2.7 percent, at $43.01. WTI fell on Tuesday to the weakest intraday prices since Nov. 14, when the contract hit $42.20 a barrel.

…Prices took the fresh leg lower on new signs of rising output from Nigeria and Libya, the two OPEC members exempt from a deal to cut production.

PG View: Oil is trading at new 7-month lows, with scope for a move back below $40.

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Posted in Markets |

Gold hovers near 5-week low; political tensions support

Reuters/Nithin ThomasPrasad/06-20-17

Gold inched higher on Tuesday, supported by global political uncertainties, after touching a five-week low earlier in the session as a key U.S.

Federal Reserve official reaffirmed the central bank’s hawkish stance on interest rate hikes.

Risk aversion due to Brexit, concerns over U.S. President Donald Trump’s ability to carry out financial reforms, election results in Europe and Middle East turmoil have provided some support for gold, said Mark To, head of research at Hong Kong’s Wing Fung Financial Group.

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Posted in Gold News, Gold Views |

Morning Snapshot: Gold better, despite firmer dollar, stocks

USAGOLD/Peter Grant/06-20-17

Gold is modestly higher to start the U.S. session. The yellow metal is better today, despite a higher dollar and another rise in stocks. These are factors that weighed on gold yesterday.

With political and geopolitical risks elevated, we may be seeing an uptick in demand for safe-havens. Firmer bonds offer some confirmation.

The U.S. Q1 current account gap widened to -$116.8 bln, inside expectations of -$123.6 bln, versus -$114.0 bln in Q4-16. That’s it for today’s economic calendar.

Boston Fed hawk Rosengren speaking at the Riksbank in Sweden warned that low rates put economies at risk and make fighting future recessions more difficult. This is reflective of my own explanation as to why the Fed is tightening policy into economic weakness. They are preparing for the next recession, that we all know is coming.

We’ll also hear Fedspeak from Fischer, Evans, Kaplan and Powell. I suspect the general theme will center on an effort to bolster confidence in at least one more rate hike this year.

This tweet from yesterday caught my eye. This too is consistent with my own views of FedSpeak. Don’t believe a word they say. The truth is in the data . . .

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Posted in Gold News, Gold Views, Snapshot |

U.S. Q1 current account gap widened to -$116.8 bln, inside expectations of -$123.6 bln, vs -$114.0 bln in Q4-16.

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Posted in Economic Data |

Gold higher at 1246.57 (+2.39). Silver 16.53 (+0.028). Dollar higher. Euro higher. Stocks called higher. U.S. 10-year 2.17% (-2 bps).

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Posted in Markets |

Gold books a loss as stocks, dollar rally

MarketWatch/Mark DeCambre/06-19-17

Gold prices finished firmly lower Monday, as the dollar strengthened and as investors favored assets perceived as risky, including stocks, over so-called havens. August gold finished off $9.80, or 0.8%, to settle at $1,246.70 an ounce. The precious yellow metal has closed down in seven of the past nine trading sessions and has been pressured down by a trio of factors: The Federal Reserve’s efforts to normalize U.S. interest rates, a climb in the Dow Jones Industrial Average and the S&P 500 index to records on the day, as well as a rising dollar . . .

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Posted in Gold News, Gold Views |

The Daily Market Report: Gold Defensive on Firmer Dollar and Stocks


USAGOLD/Peter Grant/06-19-17

Gold is edging lower, weighed by a firmer dollar and revived risk appetite, which has driven stocks higher. However, a number of factors continue to offer fundamental underpinnings to the market.

While NY Fed President Dudley reiterated today the optimism expressed in last week’s FOMC statement, one has to wonder if the central bank can really continue tightening with the anticipated fiscal stimulus stalled in Congress.

Senate republicans are acknowledging they are not even close to a deal on healthcare reform. “That impasse has held up work on a budget resolution, which is necessary to move tax reform and the annual appropriations bills,” according to The Hill.

GOP policymakers are reportedly considering cancelling the August recess in the hope of breaking the log-jam. However, the staunch political opposition and the ongoing investigations will continue to generate significant headwinds to the so-called reflation trade.

If the President’s agenda is well and truly dead in the water, and the Fed is committed to their tightening agenda, it seems like the stock market in particular is underestimating the risks to growth. “This is the most hideously overvalued market in history,” said David Stockman in an interview last week. Stockman sees potential for a 35% correction in the S&P 500.

“You want to pay twenty-five times earnings going into a world where the Fed yesterday said ‘we’re going to shrink the balance sheet by $2 trillion over the next several years?’ Where we have a government that is in total chaos. A president that they’re trying to unseat. A debt ceiling that can’t be raised. A tax bill that will never pass…” — David Stockman

Given the risks, it might be prudent to lighten-up on exposure to a grossly overvalued stock market, and reallocate that capital to an undervalued safe-haven. That haven is of course gold.

On top of all that, a U.S. fighter shot down a Syrian MiG yesterday. The Russian Defense Ministry called it a “massive violation of international law” and severely escalated the geopolitical risks in the region by saying they would start viewing U.S.-led coalition jets flying west of the Euphrates River in Syria as “targets.” If a U.S. plane is fired on by Russia or the Syrian military, all heck could break out in a big hurry.

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

Markets must grasp that the Fed is no longer their best friend


FT/Mohamed El-Erian/06-18-17

In hiking rates and, more notably, reaffirming its forward policy guidance and setting out plans for the phased contraction of its balance sheet, the Federal Reserve signalled last week that it has become less data dependent and more emboldened to normalise monetary policy. Yet, judging from asset prices, markets are failing to internalise sufficiently the shift in the policy regime. Should this discrepancy prevail in the months to come, the Fed could well be forced into the type of policy tightening process that could prove quite unpleasant for markets.

…the Fed is now more intent on gradually normalising both its interest rate structure and its balance sheet. As such, it is more willing to “look through” weak growth and inflation data.

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Posted in Central Banks, Economy, Monetary Policy |