Author Archives: News

Yellen warns investors to remain cautious as she leaves Fed post

Daily Mail/AFP/2-2-2018

“Yellen, who leaves her post on Saturday and will be replaced on Monday by Jerome Powell, made the comments in an interview with PBS television before the Dow closed down more than 650 points, its biggest drop since June 2016. ‘I don’t want to label what we’re seeing as a bubble, but I would say that assets valuations generally are elevated,’ Yellen said, advising investors to “be careful to diversify in their investments.”

Related: PBS interview of out-going Fed chairwoman, Janet Yellen (Video)

MK note:  So Janet Yellen leaves with a not so subtle warning to investors.  One wonders what she means by diversified. She isn’t talking about gold, is she? Couldn’t be. . . . .Yet, if we are talking about real diversification, we need to be.  The right weighting between stocks and bonds just isn’t going to cut it.

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How worried should you be? Traders confront inflation’s reality

Bloomberg/ Sarah Ponczek , Lu Wang , and Elena Popina/2-3-2018

“For almost a decade, investors have waited patiently for any hint of inflation in the U.S. economy, a sign the recovery can sustain itself without emergency stimulus from the Federal Reserve. Now they’re getting it, and many are shocked at the reaction. It landed last week with the worst stock market plunge since January 2016. A stronger-than-expected employment report with signs of strengthening wage growth sent the Dow Jones Industrial Average down 666 points on Friday, bringing its five-day loss to almost 1,100 points. Share volatility surged.”

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Fed officials go public with hawkish tone

Reuters/Staff/2-2-2018

Fed’s Williams says more rate hikes needed amid healthy growth

“The U.S. Federal Reserve should continue to raise interest rates to prevent an overheating in an economy buoyed by strong financial conditions, global growth and the Trump administration’s tax cuts, a top policymaker (John Williams, San Francisco FRB president) said Friday.”

Fed’s Kaplan sees inflation pressures building in 2018

Reuters/Staff/2-2-2018

“The U.S. economy will show further signs of inflation pressure in 2018 and the Federal Reserve should continue raising interest rates, Dallas Federal Reserve President Robert Kaplan said on Friday.”

MK note:  Who let the dogs out?  Today is Janet Yellen’s last day at the Fed.

 

 

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Traders are asking if the bond and stock sell-off is the start of something big

Bloomberg/Lu Wang and Elena Popina/2-2-2018

“They’ve faced threats before: swollen valuations, a stagnating economy, stretches of declining earnings. Now investors are dealing with a new menace, and it’s wreaking more havoc than anything in a year.”

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US bond market sell-off deepens after wage growth surges

MK note:  What’s moving markets today in a nutshell. . . .

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Dow plunges 500+ points

Stock plunge may not stop until interest rates stop rising

CNBC/Patti Dom/2-2-2018

“Stock investors are finally getting a taste of a higher interest rate world, and so far, they don’t like what they see. A rapid snap-up in Treasury yields has triggered the worst week for stocks since just before Donald Trump was elected president, and strategists say the sell off could continue as long as rates make the stock market uncomfortable.”

 

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India gold demand picks up after tax announcement

INDIA UPDATE

Reuters/Staff/2-2-2018

“Demand for physical gold improved this week in India as jewellers resumed purchases after the government kept import taxes on the precious metal unchanged, while buying remained subdued in most other centres in Asia. Jewellers in India had delayed purchases earlier this week and offered gold at a discount anticipating a reduction in the tax in the country’s annual budget on Thursday.”

MK note:  India remains the largest market for physical gold in the world.  China is number two.  The United States is number three – but a distant third.

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Job growth up 200,000 in January, better than expectations

CNBC/Jeff Cox/2-2-2018

“Nonfarm payrolls grew by 200,000 in January and the unemployment rate was 4.1 percent, while wages saw their biggest jump since the end of the Great Recession, the Bureau of Labor Statistics said in a closely watched report Friday.”

USAGOLD note:

DJIA down 319
10-Year Treas yield 2.84%
Volatility Index up 1.12
Dollar up
Gold down $19
Silver down 51¢

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Russian banks ramping up gold purchases

RT/Pavel Lisitsyn/2-1-2018

“The Russian government has purchased two-thirds of all the gold mined in country, buying it from local banks to add to reserves as the Kremlin sees the precious metal as a safe haven at a time of geopolitical turbulence. ‘For banks, this is good business. They credit mining companies, which return the loan with the gold they extracted. Then banks sell it to the Central Bank,’ according to the Russian Finance Ministry, quoted by Prime news agency.'”

MK note:  Nice and tidy.  An arrangement similar to the one China has in place.  We should keep in mind that, according to the U.S. Geological Survey, Russia is the third largest producer in the world at 250 metric tonnes per year and China is number one at 455 metric tonnes per year.  Between the two,  23% of the world’s annual production never reaches international markets, but disappears instead into the domestic economy or government coffers as a long-term hedge.  The United States, by the way, ranks fourth among global producers at 209 tonnes per year and Canada  fifth at 170 tonnes.

Related: Please see this USAGOLD link – “World Gold Production by Country”
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Former Fed chair Alan Greenspan sees bubbles in stocks and bonds

Bloomberg/Jeanna Smialek/1-31-2018

“There are two bubbles: We have a stock market bubble, and we have a bond market bubble,” Alan Greenspan, 91, said Wednesday . . . Greenspan, who led the Federal Reserve from 1987 until 2006, memorably used the phrase to describe asset values during the 1990’s dot-com bubble. Greenspan’s comments come as stock indexes remain near record highs, despite selling off in recent days, and as the yields on government notes and bonds hover not far from historic lows. Interest rates are expected to move up in coming years as the Fed continues with a campaign to gradually tighten monetary policy.”

MK note:  This is the Greenspan interview referenced in yesterday’s LATE REPORT. The Maestro has a way of summarizing current market events with a turn of the phrase that sticks in the mind.  “Two bubbles. . . . . .” will sink in with a good many.

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Chinese gold demand returns to growth as appetite for jewellery soars

South China Morning Post/Maggie Zhang/2-1-2018

“Consumption of the precious metal climbed 9.4 per cent to 1,089 tonnes, according to data from the China Gold Association, released on Thursday. That represents a big turnaround from a 6.7 per cent slump in demand in 2016, and means China maintains its crown as the world’s largest gold market for a fifth consecutive year. India, in second place, probably saw its gold consumption drop to an eight-year low of 650 tonnes, according to the latest estimate from the World Gold Council in November.”

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Gold jumps on Fed Statement

CNBC/Jeff Cox/1-31-2018

“The Federal Open Market Committee says current conditions indicate that the overnight funds rate should remain anchored at 1.25 to 1.5 percent. ‘Inflation on a 12-month basis is expected to move up this year and to stabilize around the Committee’s 2 percent objective over the medium term,’ the Fed statement says.”

MK note:  Gold jumped higher – up $13.50 from today’s low, up $8.50 on day.  Stocks reverse course – 200 point swing from high. 10-year went over 2.75%.  Influences in place before Fed meeting reassert themselves.

 

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Federal Reserve expeced to leave rates unchanged

CNBC/Binjamin Applebaum/1-31-2018

“The Federal Reserve will release a monetary policy statement at 2 p.m. on Wednesday, after a two-day meeting of its Federal Open Market Committee, which sets monetary policy. Investors expect the Fed to leave its benchmark interest rate unchanged, in a range between 1.25 percent and 1.5 percent. The Fed’s economic assessment may be upgraded to reflect the strength of recent data. That would strengthen investor expectations that the Fed will increase the benchmark rate at its next meeting, in late March. This is the final meeting for the Fed’s chairwoman, Janet L. Yellen. She will be replaced this weekend by Jerome H. Powell, a member of the Fed’s board.”

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Dow plunges 400 points, on track for biggest points drop since June 2016

CNBC/Fred Imbert and Alexandra Gibbs/1-30-2018

Also. . .
Bloomberg/Sarah Ponczek/1-30-2018

“Equities took a series of body blows, starting with rising anxiety that the latest gains had gone too far too quickly. News that Amazon.com, JPMorgan Chase and Berkshire Hathaway plan a joint unit that may disrupt the health-care industry jolted that sector to the steepest drop in more than a year. Apple Inc., the world’s largest company by market value, sank to a three-month low as concern mounts that its latest iPhone isn’t selling briskly. Energy producers slumped with the price of crude. European equities capped the worst day since November after Asian shares dropped.

 

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People are bragging about becoming 401(k) millionaires — and posting their balances to social media

MarketWatch/Sally French/1-3-2018

“How are Americans’ 401(k)s doing? Just check Twitter. In what many will see as the latest sign of investor euphoria — and of our society’s oversharing epidemic — sharing your 401(k) balance on social media seems to have become a thing. Meet a Reddit user going by the name ‘Subject—Beef.’ He wrote that he has contributed $308,000 to his 401(k) since 1995, and posted a detailed rundown on his yearly contributions and resulting balance of $1,007,375.50.”

MK post:  A few “old world” maxims need be taken to heart by these 401k millionaires.  The first has to do with discretion and tooting one’s horn too loudly.  The second has to do with the nature of paper profits, as in: They are not real until you take them, until that is, you sell.  The third has to do with the tenuous nature of manic stock markets, as in:  They have been known to crash unexpectedly. . . .and wickedly. How is it that all the wisdom garnered over so many years of market experience and passed from generation to generation been so helplessly lost?  Oh well. . .not my really my concern.  I just watch like you do with mild interest.

 

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CFTC, DoJ, FBI crackdown on spoof precious metals trading

CFTC/Press Release/1-29-2018

“Division of Enforcement Director James McDonald said, ‘Spoofing is a particularly pernicious example of bad actors seeking to manipulate the market through the abuse of technology. The technological developments that enabled electronic and algorithmic trading have created new opportunities in our markets. At the CFTC, we are committed to facilitating these market-enhancing developments. But at the same time, we recognize that these new developments also present new opportunities for bad actors. We are equally committed to identifying and punishing these bad actors. The CFTC’s enforcement program is built around the twin goals of holding wrongdoers accountable and deterring future misconduct. We believe these goals are best achieved when we hold accountable not just companies, but also the individuals involved. . .”

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Asian, Europe stocks trade down, U.S. futures off

Japan -1.4%
Hong Kong – 1.1%
Shanghai -1%
London (mid-day) – .6%
Frankfurt – .6%
U.S. futures (DJIA) – .8% (-215)

FOMC meeting today.  Asia, Europe stocks follow U.S. lead yesterday.  Also, 10-year yield kicks higher, now 2.714%.

 

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Rates are shooting higher on inflation fears, 10-year yield its highest in nearly 4 years

CNBC/Alexandra Gibbs and Thomas Franck/1-29-2018

“The yield on the benchmark 10-year Treasury note surged to 2.727 percent on Monday, its highest since April 2014, as investors bet on an accelerating economy and inflation.  A falling dollar this month has also helped drive yields higher as traders worry it may reduce the appetite for Treasurys, while boosting inflation. The 10-year yield ended December at 2.43 percent.”

MK note:  Stocks were down 150 earlier, down 117 now.   The market is taking rates higher, i.e., bond liquidations pushing up rates.  Mortgage rates jumped today to the highest level in four years, but that shouldn’t be a surprise given the Fed’s intentions to push rates higher.

Related:  Welcome to the new reality of leaping U.S. Treasury debt sales/Bloomberg,  posted earlier today (scroll or click).
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China’s silver imports surge in 2017

Scrap Register/1-29-2018

“China’s gold imports fell during last year, but silver imports rose, said Commerzbank in a snippet. According to customs authorities, silver imports soared by 28% year-on-year to nearly 4,300 tons, achieving a seven-year high. Last year saw solar-cell production stepped up considerably for the second consecutive year in China, with over 50% more solar panels installed. This resulted in high demand for silver, Commerzbank added.”

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Welcome to the new reality of leaping U.S. Treasury debt sales

Bloomberg/Liz McCormick and Saleha Mohsin/1-23-2018

“The world’s biggest bond market is about to get a taste of the future, with the U.S. Treasury expected to unveil bigger note sales for the first time since 2009 to fund budget deficits that are likely to deteriorate for years to come. . .Dealers forecast an onslaught of debt supply that will lead issuance to at least double this year to more than $1 trillion, the most since 2010, starting with sales of short- to medium-term maturities.”

MK note: This comes at a time when the Federal Reserve will no longer be a buyer (at least that is its plan) and when China (the top holder of U.S. debt) and Japan (the second largest holder of U.S. debt) have withdrawn from the market, at least for now – all of which puts the onus on US domestic buyers for the lion’s share of the federal government’s upcoming bond issue. Keep in mind the $1 trillion figure is an estimate.

Related:  CNBC/Stephanie Landsman/1-28-2018 A fire sale by the Treasury could send shock waves through the bond market, strategist warns / “They [people] are worried about Treasury issuance going up, up, up. You could see an increase in 2018 of 50 percent — maybe more versus last year. That’s got a lot of people very concerned, myself included.” – Michael Schumacher, Wells Fargo head of interest rate strategy
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The dollar’s terrible week is a warning of what could come if Trump’s team missteps on trade

CNBC/Patti Dom/1-27-2018

“But the concern has been that dollar assets could lose their appeal if the dollar becomes too weak, if the Trump administration really does want to talk down the green back. McCormick said there was some speculation that the Trump administration weak dollar comments were a response to the reports earlier this month that China was considering cutting back on Treasury purchases because they are no longer as attractive and because of Trump trade policies. China is the largest holder of Treasurys, but it’s not expected to back out of the Treasury markets in a significant way.”

MK note:  Noteworthy speculation on what might have been behind Trump administration comments early-on at Davos.  Was China’s gambit, later denied, the first shot fired in the trade and currency wars? It’s plausible. . . .Asian markets are lower this morning on a Beijing Daily editorial written by a senior economic planner who warned of “Black Swan and “Grey Rhino” events in China’s economy during 2018.

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Trump hints at retaliation at ‘very unfair’ EU trade policies

Reuters/Staff/1-28-2018

“We cannot get our product in. It’s very, very tough. And yet they send their product to us – no taxes, very little taxes. It’s very unfair. They’re not the only one, by the way. I could name many countries and places that do. But the European Union has been very, very unfair to the United States. And I think it will turn out to be very much to their detriment.”

MK note:  Back from Davos.  Here we go. . . . . . Please be aware that we do not post this sort of thing because we have suddenly gotten overtly political. Our main concern remains the impact of policy on the financial markets, currencies and gold and what we feel is important to pass along to you as a precious metals owner.

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Investors Intelligence Bulls & Bears Ratio

Stock Market Indicators: Fundamental, Sentiment & Technical

Yardeni Research/1-25-2018

MK note:  Heads up. Do not overlook the ratio in 1987 as compared with today.  Yardeni’s compendium of charts at the link above is worth the visit.

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Winter is one of the darkest ever for parts of Europe

The Guardian/Jon Henley/1-19-2018

“Sunshine is in short supply across a swathe of north-west Europe, shrouded in heavy cloud from a seemingly never-ending series of low pressure systems since late November and suffering one of its darkest winters since records began. If you live in Brussels, 10 hours and 31 minutes was your lot for the entire month of December. The all but benighted inhabitants of Lille in France got just two hours, 42 minutes through the first half of January. “Sound the alarm and announce the disappearance,” read a despairing headline in photon-deprived northern France’s regional paper, La Voix du Nord. “A star has been kidnapped. We still have no sign of life from the sun.”

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Davos turns bullish on commodities

Bloomberg/Javier Blas/1-26-2018

“Daniel Yergin, the oil historian and consultant at IHS Markit Inc., summarized what many said in private: ‘The combination of strong economic growth and cheap money is lifting commodities.’ The falling value of the U.S. dollar — often a trend that drives commodities higher — is also helping, particularly after U.S. Treasury Secretary Steven Mnuchin suggested in Davos the administration favored a weaker currency. Although President Donald Trump later walked back the comments, oil and commodities have felt the benefit of the dollar’s 11 percent slide over the last year.”

MK note:  As previously noted, what’s good for the commodities complex is good for gold. As this report notes, the Bloomberg Commodity Index is up 41% over the past two years – a strong move higher.  Gold by comparison is up 26%, so it has some catching up to do.

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US economic growth slows in fourth quarter on surging imports

Reuters/Lucia Mutikani/1-26-2018

“U.S. economic growth unexpectedly slowed in the fourth quarter as the strongest pace of consumer spending in three years resulted in a surge in imports. Gross domestic product expanded at a 2.6 percent annual rate also restrained by a modest pace of inventory accumulation, the Commerce Department said in its advance fourth-quarter GDP report on Friday. That followed a 3.2 percent growth pace in the third quarter.”

MK note:  Back below the 3% target. . . .

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Treasury Secretary Mnuchin says stronger dollar is in the best interest of the country

CNBC/Jeff Cox/1-26-2018

“Treasury Secretary Steven Mnuchin says a statement he made earlier this week that shook the dollar was taken out of context. He says he isn’t concerned with where the currency is in the near term but believes a strong dollar is better in the long run.”

MK note:  More backtracking this morning. . .but the cat, so to speak, is out of the bag.  Currencies are all tracking higher this morning in dollar terms.  The Japanese yen is up sharply.

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Goldman, Citi final bidders for Scotiabank’s metals business: sources

Financial Post-Reuters/Peter Hobson and Clara Denina/1-24-2018

“Most of ScotiaMocatta’s business is in precious metals and it’s one of five banks that clear bullion in London’s US$5 trillion a year gold market . . . Scotiabank hired JPMorgan to help with the sale after conducting a review of its metals business in 2016 following a string of lawsuits related to the manipulation of gold and silver price benchmarks and due to dissatisfaction over its performance, sources said.”

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A rundown of the past two days, and today’s events

DAVOS UPDATE

Bloomberg/Various/1-26-2018

The Guardian/Various/1-26-2018
(the British perspective, includes some interesting photos)

USAGOLD note:  For those with the interest, the links above take you to pages with brief summations of commentary from various Davos participants and a rundown of the past two days controversial events.  The Davos Conference is known for its general decorum and display of goodwill among the world’s elite investors, central bankers, corporate heads, political figures, etc.  This year, as this page amply illustrates, the affair has been a bit more rancorous than usual. It all pretty much concludes this afternoon at 2pm local time with the Trump address.

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Gold tipped to break $1,500/oz this year to hit 5-year high – GFMS

Reuters/Jan Harvey/1-25-2018

“The geopolitical climate and equity markets – (which are at) growing risk of a sharp correction – will be key drivers,” GFMS analyst Saida Litosh said. “We expect to see higher volatility due to increased uncertainty revolving around Trump’s politics, Brexit and tensions in Europe, and a pick up in retail investment demand from Asia particularly should we see gold’s price momentum going forward.”

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