Category: Daily Market Report

Morning Snapshot: Gold moves back toward highs for the year

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.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Rebounds From Earlier Losses

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.

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

Morning Snapshot: Gold retreats into the range

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.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Remains Well Bid Near Highs for the Year

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.

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

Morning Snapshot: Gold keeps the pressure on the upside

USAGOLD/Peter A. Grant/02-17-17

Gold continues to pressure the upside, putting the high for the year at 1244.71 to the test. Lower stocks and yields this morning are seen as supportive. The dollar index is trading slightly higher, but within yesterday’s range.

The economic calendar is quiet ahead of the long holiday weekend, with just January LEI out at 10:00ET. Expectations are for a 0.4% rise.

U.S. markets will be closed on Monday in observance of President’s Day. Canadian markets will be closed as well for Family Day.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Keeps the Pressure on the Upside

USAGOLD/Peter A. Grant/02-16-17

Gold remains well bid, pressuring the highs for the year that were established last week. While the yellow metal has been unable to break-through to new highs as of this moment, the impetus remains to the upside, particularly with the dollar giving back recent gains.

Gold recovered nicely from yesterday’s intraday losses after Fed Chair Yellen acknowledged during testimony before the House Financial Services Committee that economic growth has been “quite disappointing.” That sort of flew in the face of her previous testimony, which centered on economic optimism, the achievement of Fed goals and the belief that it would be “unwise” to wait too long to raise rates.

“Economic growth has been quite disappointing.” — Janet Yellen

So, that begs the question: Why did we have to wait until she said the words, when the data clearly illustrate the reality. The last time we saw annual growth at 3% or greater was 2005. That’s 12-years ago! Growth last year was just 1.6%. Forecasts for Q1-17 have been revised lower in recent weeks, even as Yellen and her minions preach optimism and the need for multiple rate hikes this year.

While the Fed may be finally generated the inflation they have long sought, real yields out to the 10-year note remain negative. CPI rose to a 2.5% annual rate in January, while the 10-year note is yielding 2.45% today.

With our major creditors dumping Treasuries at an unprecedented rate, the Fed may in reality not need to do anything more to prompt rates higher. Supply is certainly not going to be a problem if fiscal stimulus commences, on top of the pig-through-a-python demographic reality as retiring baby boomers start drawing on already underfunded entitlements.

All of this goes a long way toward explaining why gold is defying widely held beliefs that it can’t rise when stocks are going up, yields are going up and the dollar is going up. In fact, this might be viewed as a signal; that now perhaps more than ever, gold is a critical component of a well diversified portfolio.

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

Morning Snapshot: Gold approaches last week’s high as dollar weakens

USAGOLD/Peter A. Grant/02-16-17

Gold pushed higher to approach resistance marked by the 1244.71 peak from last week. A short term breach of this level would put the yellow metal at new 14-week highs.

This morning’s data had little impact on the market. Initial jobless claims rose modestly last week. Housing starts declined by 2.6% in January, but still came in higher than expected thanks to a positive revision to December. The Philly Fed index beat expectations by a wide margin.

The dollar has come under renewed pressure, despite recent upbeat data and heightened rate hike expectations. Even so, gold has fared quite well in the face of the 2-week rebound in the dollar index. If the dollar gives it all back, gold should continue its trend higher.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Recovers From Early Losses, Despite Soaring Stocks, Higher Rate Hike Expectations

USAGOLD/Peter A. Grant/02-15-17

Gold slipped to new lows on the week after a round of robust U.S. economic data heightened the prospects for multiple rate hikes this year. However, these dowticks attracted buying interest and the yellow metal subsequently rebounded to establish new intraday highs.

Higher than expected consumer price inflation, solid retail sales and an impressive jump in the Empire State index all conspire to push rate hike expectations higher. Prospects for a move at the March FOMC meeting rose to 43% intraday.

Weaker than expected industrial production tempered enthusiasm somewhat, but more talk of tax reform from President Trump pushed stocks higher. Trump said his tax plan would benefit both middle-income families and businesses by lowering rates and simplifying the tax code.

During her second round of testimony before Congress, Janet Yellen reiterated that waiting too long to raise rates would be “unwise.” However, under questioning — and despite her expressed optimism over the past two-day — she acknowledged; “Economic growth has been quite disappointing.”

In fact, on the heels of this morning’s data dump, the Atlanta Fed’s GDPNow forecast for Q1-17 was lowered to 2.2%. That’s a 50 bps drop from the 2.7% forecast from 09-Feb and off more than 100 bps from the 3.3% prediction made earlier in the month.

So, if inflation is heating up and growth remains anemic; are we entering into a period of stagflation? In a MarketWatch article about renewed interest in gold by money managers, the author cites several reasons for this:

They’re worried about inflation, stagflation and global protectionism, and they think gold is the best insurance against all three. — Brett Arends, MarketWatch Columnist

That would go along way toward explaining why gold is so well supported in the face of ongoing stock market gains, rising yields and a generally firm dollar. Savvy investors are diversifying their holdings; laying in some insurance in the form of gold as a means of preserving the wealth that they have accumulated.

It reminds me of the Grant Williams presentation called Nobody Cares from about a year ago, where he likens gold to flood insurance. It’s a fitting analogy; because when the storm comes — and oh it will come — you’ll be thankful you have insurance.

Williams believed that — outside of “us” — nobody cared about gold at the time. However, he speculated that “the day is coming when that’s going to change dramatically. And when that day arrives the pendulum is going to swing to the other extreme [Everybody Cares]. And that’s a move that can not be resolved without vastly higher [gold] prices.”

A little more than a year after his presentation, and with money managers now taking interest, we are assuredly closer to the day when everybody cares about gold again. Now might be a good opportunity to reevaluate your gold position.

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

Morning Snapshot: Gold retreats on upbeat U.S. data

USAGOLD/Peter A. Grant/02-15-17

Gold has come under selling pressure following a round of generally upbeat U.S. economic data upped the prospects for a March rate hike. The yellow metal slipped below support at 1218.40/1217.51 before stabilizing somewhat.

The initial indication of hotter inflation provided yesterday by PPI did indeed carry over to consumer prices in January. CPI came in at +0.6%, twice expectations of +0.3%. Core came in at +0.3% on expectations of +0.2%.

Retail sales bested expectations in January at +0.4%, versus expectations of +0.1%. December was revised to +1.0% from +0.6% previously. The NY Empire State index surged to 18.7 in February, well above expectations of 7.0, versus 6.5 in January.

Janet Yellen testifies before the House later this morning. Her testimony yesterday before the Senate was interpreted as being rather hawkish. Today she has additional evidence that bolsters the case for another rate hike, perhaps as soon as the March FOMC meeting.

Yields are on the rise, bolstering the dollar and giving stocks pause. And yet there are still plenty of uncertainties out there as well — political, geopolitical and economic in nature — that just might give the Fed pause.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Gives Back Early Gains as Yellen Strike a More Hawkish Tone

USAGOLD/Peter A. Grant/02-14-17

Gold rose initially on Tuesday after an indication of higher inflation. However, these gains could not be sustained as Janet Yellen continued to beat the drum of multiple rate hikes this year.

January PPI came in a +0.6%, twice expectations of +0.3%. Core was +0.4% on expectations of +0.2%. Higher energy prices were cited as the primary driver and we’ll find out tomorrow if these same forces carried through to consumer prices. CPI is expected to show a 0.3% gain in January, with core rising 0.2%, when the data are released tomorrow morning.

Gold gained on PPI data, but retreated when Janet Yellen suggested in testimony before the Senate Banking Committee that it would be unwise to wait too long before raising rates again. The suggestion was that March is on the table, but the market seems to think June is the more likely reality.

“As I noted on previous occasions, waiting too long to remove accommodation would be unwise.” — Janet Yellen

Ms. Yellen expressed some degree of caution though, adding that “considerable uncertainty attends the economic outlook,” citing “possible changes in U.S. fiscal and other policies.” In essence, everything could change based on the fiscal policy agenda pursued by the Trump administration.

The generally hawkish tone pushed yields higher and the dollar index reached new 4-week highs. U.S. stocks dipped and then recovered as the prospects for a corporate tax cut seems to outweigh tighter monetary policy at this point. We’ll see how that plays out if the dollar recovers further.

As for Ms. Yellen’s optimism, I redirect you to yesterday’s DMR, where we talked about anemic growth. When Yellen said the rate hike this past December was justified because of an improving economy, she seemed to be ignoring the rather significant growth slowdown seen in Q4-16.

We’ll wait and see how this all reconciles in the weeks and months ahead. However, there is still enough uncertainty out there to keep the gold market underpinned.

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

The Daily Market Report: Gold Weighed by Higher Stocks, But Growth Risks Underpin

USAGOLD/Peter A. Grant/02-13-17

Gold is maintaining a corrective to consolidative tone after failing to sustain Friday’s rebound in the face of continued stock market gains. Shares remain buoyed by President Trump’s promise that he will announce something big with regard to corporate taxes in the weeks ahead.

The trending stock market is certainly no reason to eschew one’s hedges. In fact, the current political and geopolitical environments are seen as key underpinnings to the gold market.

Data out this week are likely to reinforce rising concerns about inflation, which should also help support gold. While this is exactly what the Fed has been striving for, that it is now coming without the support of wage or economic growth should raise concerns.

In an article published last week on the St. Louis Fed’s website, entitle Why Does Economic Growth Keep Slowing Down?, the author points to weak productivity and capacity utilization.

The U.S. economy expanded by 1.6 percent in 2016, as measured by real gross domestic product (GDP). Real GDP has averaged 2.1 percent growth per year since the end of the last recession, which is significantly smaller than the average over the postwar period (about 3 percent per year). — Fernando Martin, Senior Economist, St. Louis Fed

Aside for a very minor turn higher in Total Factory Productivity, the above chart doesn’t show any real indication that things are starting to turn around. And Mr. Martin notes that the 1.6% annualized growth in 2016 is well below even the weak average over the past 8-years.

Sort of makes you want to look at the recent stock market performance with some degree of suspicion. I wonder whether the anticipated corporate tax cut will do anything to improve productivity, capacity utilization, or wages for that matter . . .

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

Morning Snapshot: Gold slips back toward Friday’s corrective low

USAGOLD/Peter A. Grant/02-13-17

Gold came under renewed pressure in early U.S. trading, falling back to the low end of the recent corrective range. The global risk-on trade continues to buoy stocks, even with Japan’s Q4 GDP miss. U.S. shares still seem optimistic on President Trump’s promised “big news” on the corporate tax front.

I will tell you though that America’s biggest creditors aren’t dumping bonds because they suddenly have a higher risk appetite (see the Bloomberg article posted earlier this morning). They are ditching Treasuries because they sense there are heightened risks in the U.S. that are going to continue to weigh on bonds.

There is nothing on the U.S. calendar today, but the rest of the week is quite busy. Highlights include January PPI tomorrow and January CPI, retail sales and industrial production on Wednesday. Janet Yellen also appears before Congress on Wednesday.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Rebounds, Led by Silver

USAGOLD/Peter A. Grant/02-10-17

Gold has rebounded from earlier downticks to trade higher on the day. It looked like the yellow metal was dragged higher by silver today, which touched $18 for the first time since early November.

Gold — and silver as well — were deemed to be under pressure because of heightened rate hike expectations in the wake of yesterday’s much stronger than expected December wholesale sales. Along with President Trump’s assurance of big news on the corporate tax front in the coming weeks, stocks have continued their trend higher.

With stocks and gold rising in tandem, investors may be looking past the rhetoric and thinking through the implications of lower tax revenue and higher government spending. It could all work out if new policies are implemented that really reinvigorate growth to the point where revenue either holds steady or rises. However, there’s plenty of reasons to still have doubts — both domestic and global — which may be promoting investors to lay in a hedge in the form of gold.

My concerns were reinforced when watching the Grant Williams presentation that I posted earlier today. I encourage you to take 30-minutes this weekend to watch this compelling bit of analysis. We’ll be waiting for your phone call on Monday . . .

FOMC Board of Governors member Daniel Tarullo announced that he was resigning today. That means President Trump now gets to appoint three governors this year and two (including the chair) next year. By those appointments he will unquestionably be able to sway monetary policy through much of his first term as President.

I have argued in recent months that a tax-cut and spend administration really needs the benefits of a weaker dollar and an accommodative central bank. Despite his beefs with Janet Yellen, he actually might be looking for more doves of her ilk. In fact, I wouldn’t be surprised in the least if he asked her to stay on!

The best way to weaken the dollar is to dash the notion that U.S. central bank policy is diverging from the accommodative stances of all the other major central banks. Mr. Trump could get that all rolling simply by his appointments to the Fed. And that could be very positive for gold.

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

The Daily Market Report: Gold Turns Mildly Corrective

USAGOLD/Peter A. Grant/02-09-17

Gold turned mildly corrective following a much better than expected wholesale sales print for December. The data seem to have inspired some renewed confidence in the U.S. economy and hence rate hike expectations have edged higher as well.

Stocks surged to new record highs and the dollar firmed as well. Stocks got an additional boost from President Trump’s comment that he will have something “phenomenal” to announce on corporate taxes within the next several weeks.

The downside has been contained by former resistance around the 1230.00 level thus far. Again, I continue to be impressed by gold’s resilience in the face of ongoing stock market gains.

In light of the recent gains, gold was probably due for a corrective pullback. We’ll be watching for heightened buying interest on this dip, with haven buying likely to remain a stiff tailwind.

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

Morning Snapshot: Gold consolidates recent gains

USAGOLD/Peter A. Grant/02-09-17

Gold is consolidating recent gains within a narrow range. Momentum remains clearly to the upside in the wake of this week’s push through important resistance levels.

Initial jobless claims fell 12k last week to 234k, below expectations of 249k. Continuing jobless claims rose to 2,078k. Wholesale sales and M2 are out later this morning.

Today’s $15 bln 30-year bond auction will be watched closely after yesterday’s disappointing 10-year auction.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Continues to Trend Higher

USAGOLD/Peter A. Grant/02-08-17

Gold continues to trend higher, driven by a robust haven bid and the strong technical setup. The yellow metal hit another 3-month high at 1244.71, helped by a softer dollar, stock and yields.

Adrian Ash of BullionVault notes that last month was the best January performance since 2012, and the “fastest 1-month price jump since last summer’s Brexit shock.” February is off to a roaring start as well. The yellow metal is up nearly 8% YTD.

USAToday outlines some of the fundamentals driving the price of gold:

Economic policy uncertainty in the U.S. under President Trump. Political anxiety surrounding the populist movement in Europe and elsewhere. Ongoing stimulus from global central bankers. Angst over rising inflation. The U.S. dollar falling in value versus foreign currencies. — USAToday


Despite two rate hikes over the past 14-months — the only two in more than a decade — Fed policy remains extremely accommodative as well. U.S. economic date continues to be rather erratic, perpetuating doubts about the underlying true health of the economy.

The Atlanta Fed cut their Q1 GDP forecast to 2.7% from 3.4%, citing weaker personal consumption expenditures and fixed investment growth:

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2017 is 2.7 percent on February 7, down from 3.4 percent on February 1. The forecasts for first-quarter real personal consumption expenditures growth and real private fixed investment growth fell from 3.8 percent to 3.1 percent and 8.0 percent to 5.8 percent, respectively, following the data releases on February 2 and 3. — Atlanta Fed

This comes on the heels of sub-2% print for Q4-16 GDP. The chart below plots the Atlanta Fed’s GDPNow forecasts against actual GDP. No great shakes on the growth front . . .

And then this chart came across my Twitter feed yesterday, with the simple caption “Uh-oh.” Presented in this light, even the much ballyhooed labor market is not looking all that healthy.

As we’ve repeatedly mentioned, this recovery is getting very long in the tooth. And whether a recession is just around the corner, or whether it will be forestalled further by debt-fueled fiscal stimulus, gold can be considered critical portfolio diversification in either circumstance.

Many of our clients seem to recognize that stocks are likely overextended again. Recent physical demand has been centered on taking profits off the table in the stock market and bolstering physical gold positions as a means of preserving wealth.


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

Morning Snapshot

USAGOLD/Peter A. Grant/02-08-17

Gold continues to charge higher, pushing above 1240.00 for the first time in 3-months. The yellow metal continues to be buoyed by a solid safe-haven bid and a strong technical outlook that I outlined in yesterday’s DMR.

The GLD ETF has seen five consecutive days of inflows, the longest streak since last June. Billionaire investor Stanley Drucknemiller is back in the gold market as well, after famously selling his position on election night, he was a buyer again in December and January. “I wanted to own some currency and no country wants its currency to strengthen,” said Druckenmiller. The fact that he characterizes gold as a currency is salient.

The U.S. economic calendar is light today with EIA crude inventory data and a $23 bln 10-year note auction.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Recovers From Earlier Corrective Downticks

USAGOLD/Peter A. Grant/02-07-17

Gold is trading slightly higher on the day after recovering from earlier corrective losses, as stock and dollar gains have moderated. Safe-haven interest and the generally constructive technical picture are seen as being supportive to the yellow metal.

Going back to December and the rate hike, we’ve mentioned on numerous occasions how familiar the price action felt to that surrounding the the rate hike in the previous December (2015). I received a chart yesterday from Ron Griess of that clearly illustrates the déjà vu:

As Ron points out, “history does not always repeat exactly,” but the match at least through yesterday is pretty interesting. The implication is that gold may have about another 10% on the upside, if it is in fact going to follow the 2015/2016 track.

Yesterday we saw definitive breaches and closes above two key technical levels: The 38.2% retracement level of the entire decline from the July 2016 peak at 1375.15 to the December 2016 low at 1122.50, which was at 1219.01. And the 100-day moving average at 1220.21.

This lends considerable credence to the uptrend that has emerged since December. With the 20-day MA trending higher toward the 100-day MA, we’ll look for a crossover in the near-term as another encouraging technical signal. The next resistance to watch is defined by the 50% retracement level of the aforementioned H2-16 decline, which comes into play at 1248.82.

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

Morning Snapshot: Gold corrects modestly

USAGOLD/Peter A. Grant/02-07-17

Gold has turned modestly corrective in the wake of solid gains on Monday. The yellow metal is being weighed as yields, the dollar and stocks are all higher this morning. Again, I’m impressed by gold’s resilience as haven demand continues to offer support.

In the Q&A session following his speech yesterday, Philly Fed’s Harker said that the March FOMC meeting is on the table for a potential rate hike. However, he acknowledged he has not made up his mind yet. That doesn’t really indicate much, but yields rebounded somewhat nonetheless.

The trade deficit narrowed slightly in December. Later this morning we’ll see JOLT job openings and consumer credit for December. There is also a $24 bln 3-year note auction.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Pressuring 12-Week Highs

USAGOLD/Peter A. Grant/02-06-17

Gold has extended to the upside to pressure the November 16 high at 1233.10. Today’s gains constitute a definitive breach of the 100-day moving average, further bolstering the uptrend that has emerged since the yellow metal bottomed back in December.

Safe-haven interest and the positive technicals seem to be the primary driving forces these days. Even ongoing strength in stocks and a modest rebound in the dollar don’t seem to be providing much of a headwind.

The euro is under pressure today as Marine Le Pen launched her bid to be France’s next President, as one of her chief rivals in the contest became embroiled in a scandal. Le Pen’s platform is centered on getting France out of the EU.

It seems like globalization in general and the EU in particular are under assault on multiple fronts. Dissolution of the EU would be an incredibly disruptive event. If the countries of Europe return to their own currencies, be prepared for a wild race to the bottom. Once the dominoes start tumbling . . .

National Front leader Marine Le Pen will take back control of the central bank and fire up the printing presses as she leads France out of the euro if she wins the presidential election in May, her chief economic adviser said. — Bloomberg

But that first domino need not be France. There are considerable risks in Italy after PM Renzi was forced to step down late last year. Even little Greece, if they are unable to secure another bailout, could trigger a contagion effect.

Political uncertainty is rampant in the U.S. as well. The first couple weeks of the Trump administration have been focused on immigration and trade, with little movement on tax/regulatory relief and the much anticipated fiscal stimulus.

It’s still early in the game here, but there are rising concerns and the “Trump rally” in stocks may be stalling. “One month into the year, the balance of risks is somewhat less positive in our view,” said Goldman Sachs economist in a report. Higher risks typically lead to higher gold.


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

Morning Snapshot

USAGOLD/Peter A. Grangt/02-06-17

Gold has extended to the upside to pressure resistance marked by the 12-week high at 1233.10. The yellow metal continues to attract haven buyers in the face of U.S. political uncertainty and a host of geopolitical tensions.

Gold remains buoyant despite a modest rebound in the dollar, which is being offset to some degree by softer stocks. The technicals remain constructive, overriding normal correlations to some degree.

The economic calendar is light today with just LMCI and FedSpeak from Harker.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Remains Well Bid, Despite NFP Beat

USAGOLD/Peter A. Grant/02-03-17

Gold remains generally well bid, despite a better than expected headline jobs number. The yellow metal is trading just below the 11-week high that was established yesterday and appears poised for about a 2% gain this week.

U.S. nonfarm payrolls came in at +227k, which was above median expectations of +175k and the more optimistic +200k whisper that emerged after the significant ADP beat earlier in the week. There was a net 39k downward revision to December and November payrolls and the jobless rate ticked higher to 4.8% as more job seekers returned to the labor market.

However, wage growth remains sticky. Average hourly earnings rose just 0.1% in January, below expectations of +0.3%. Additionally, the 0.4% rise in December was halved to +0.2%. Annualized hourly earnings were just +2.5%, the lowest since last August.

Persistently slow wage growth dims the prospects for inflation and hence the likelihood of multiple rate hikes this year. And the stock market seems to like that interpretation; with U.S. shares trading sharply higher since the jobs data came out.

Despite the solid rebound in stocks, gold is holding up nicely. The fact that the dollar gave back earlier gains is helping the cause.

The World Gold Council released their Gold Demand Trends Full Year 2016 today. Overall gold demand rose 2% in 2016, reaching a 3-year high of 4309 tonnes. These gains were largely driven by the 70% gain in investment demand.

ETFs inflows saw their strongest year since 2009, alongside “broadly stable” bar and coin demand. “Concerns over the uncertain path of future interest rate hikes, the US election, negative interest rates and price momentum supported inflows,” according to the report.

While the election is behind us, these general themes are likely to continue supporting gold this year. Uncertainty and unrest in the wake of the aforementioned election are seen as destabilizing, which seems to be driving haven demand. And there are a couple key elections in Europe this year that could conceivably impact the survivability of the EU itself.

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

Morning Snapshot: Gold little changed in the wake of NFP beat

USAGOLD/Peter A. Grant/02-03-17

Gold slipped in reaction to this morning’s better than expected jobs report, but quickly bounced back into positive territory. It looks like the yellow metal may end the week up about 2% and above $1200.

Nonfarm payrolls came in at +227k, above expectations of +175k and a >200k whisper that emerged in the wake of the much better than expected ADP survey that came out yesterday. The unemployment rate ticked higher with more Americans out there actively seeking employment.

While the headline number was solid, the back-month revisions tempered enthusiasm somewhat. November was revised down from +204k to +164k, and December was revised up from +156k to +157k. Wage growth was disappointing as well: Average hourly earnings rose 0.1% in January, below expectations of +0.3%, versus a negative revised +0.2% in Dec (was +0.4%).

The dollar gave back its intraday gains, but stocks seem to like the news. These opposing forces leave gold little changed on the day, but the underlying bias remains to the upside.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Surges to 11-Week Highs

USAGOLD/Peter A. Grant/02-02-17

Gold surged to a new 11-week high of 1225.29 before pulling back somewhat. The yellow metal continues to be supported by softer stocks and the dollar, but heightened geopolitical tensions were an added factor today.

“As of today, we are officially putting Iran on notice,” said National Security Advisor Michael Flynn. President Trump reiterated that statement in a tweet. Albeit somewhat vague, it seems clear that tensions are escalating. There have been some rumblings of walking back the nuclear agreement struck last year by President Obama and possibly reinstating sanctions against Iran.

Gold also likely benefited from having the first FOMC of 2017 in the rear-view-mirror. The Fed held steady on policy, as was widely expected. Prospects for a March hike actually diminished to 13.3% in the wake of the benign statement. The market is likely feeling like they probably don’t really have a rate hike to contend with until June or later.

Focus now shifts to tomorrow’s jobs report. Nonfarm payrolls are expected to come in around +175k and the jobless rate is expected to hold steady at 4.7%. However, in the wake of yesterday’s much better than expected ADP print, there are definitely whispers of a possible NFP beat.

If payrolls come in much hotter than expected, say over 200k, odds of a March rate hike would likely become much shorter. That would offer some support to the dollar. However, gold seems to be much less sensitive these days to ebb and flow of rate hike expectations. Markets in general seem to be giving far more credence to the political climate and fiscal policy expectations.

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

Morning Snapshot: Gold charges to 11-week highs

USAGOLD/Peter A. Grant/02-02-17

Gold surged to new 11-week highs as weaker stocks and a defensive dollar continues to provide a tailwind. News that the Trump administration has put Iran “on notice” after their recent missile test is likely contributing to the haven bid as well.

The Fed held steady on policy yesterday, which means gold has some room to run before investors have to start worrying about Fed action at the March FOMC meeting in about 6-weeks. While the door is considered open for a rate hike in March, the market seems to think the Fed won’t tighten until H2.

The BoE held steady on policy today, but is more optimistic on growth moving forward. While sterling came under pressure, it was insufficient to buoy the dollar much.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Pulls Back to the $1200 Area

USAGOLD/Peter A. Grant/02-01-17

Gold is under moderate pressure today, and probed briefly back below $1200. The yellow metal was weighed by a rebound in stocks and the dollar, which came on the heels of some better than expected U.S. economic data.

The ADP employment survey for January came in much higher than expected at +246k private sector jobs. That has inspired some optimism that nonfarm payrolls for January, to be released on Friday, will beat expectations as well. Consensus for NFP is +175k, with the unemployment rate holding steady at 4.7%.

The Fed will announce policy at 2:00ET. They are widely expected to hold steady, but analysts will pour over the statement in an effort to glean clues as to when the next rate hike might be forthcoming. Given the ongoing unevenness of the data, and in particular the softness in Q4-16 GDP, I think there are some doubts about the likelihood of multiple rate hikes this year.

Political and policy uncertainties continue to give markets pause as well. While there was much stock market optimism centered on the anticipated deregulate, tax-cut and spend policies of the Trump administration, that seems to have faded somewhat amid protests over his cabinet nominations and executive orders. At some point, he’s going to have to go to Congress with his policy agenda and the specifics will have to be hashed out.

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

Morning Snapshot: Gold retreats on ADP beat

USAGOLD/Peter A. Grant/02-01-17

Gold has retreated intraday after the ADP employment survey came in much better than expected. This sets up some upside risk for Friday’s nonfarm payrolls report, where expectations are presently running around +175k.

Additional data releases today include: Markit manufacturing PMI and ISM for January. Construction spending for December. EIA crude stocks and auto sales.

Later today the Fed will announce policy. No change is expected, but it seems like they should at least mention the significant slowdown in growth seen in the last 3-months of the year, just as they were pulling the trigger on their second rate hike in more than a decade.

Posted in Gold News, Gold Views, Snapshot |

Daily Market Report: Gold Surges Back Above $1200 as Dollar Index Matches 9-Week Low

USAGOLD/Peter A. Grant/01-31-17

Gold has moved within striking distance of the 10-week high of 1220.12 that was established last week. The yellow metal pushed convincingly back above $1200 after an advisor to President Trump said that Germany was taking advantage of the EU and the U.S. by taking advantage of a “grossly undervalued” euro.

I’m not even sure what that means. Germany does not have the option to use another currency. The euro is weak because of extremely accommodative ECB policy, and perhaps more importantly the tighter policy that our own Fed has implemented in recent years; dating back to the tapering of QE that began in 2013, all the way through the 25 bps rate hike this past December. Interest rate differentials are a primary driving force in FX flows.

So, is the dollar too strong, or is the euro too weak? And depending on your answer; who is responsible and what should be done to “correct” the situation? Suddenly gets a little more complicated, doesn’t it . . .

At any rate, the comments today scared the shorts in the euro. The euro rose accordingly, driving the dollar lower. The dollar index hit a 9-week low and key support level at 99.43. As gold is priced in dollars, a weaker greenback typically equates with a higher gold price.

The overarching theme here is the uncertainty that revolves around what many would argue is shoot-from-the-hip policy-making. This is likely to enhance the appeal of safe-haven assets such a s gold.

Offering additional support for gold was some soft economic data today. Chicago PMI fell to 50.3 in January, below expectations of 55.0, versus a negative revised 53.9 in December (was 54.6). Additionally, consumer confidence slumped to 111.8 in January, below expectations of 113.0, versus a negative revised 113.3 in December. I wondered just yesterday in the morning Snapshot when “consumer optimism will take a hit.”

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

Morning Snapshot: Gold jumps back above $1200

USAGOLD/Peter A. Grant/01-31-17

Gold jumped back above the $1200 level as stocks remain defensive and the dollar retreated. Trump advisor Peter Navarro said this morning that Germany is taking advantage of both the EU and U.S. with a “grossly undervalued” euro. That further elevated geopolitical and international trade concerns, driving the yellow metal to new highs for the week.

That comment came on the heels of slightly better than expected first look at European Q4 GDP at +0.5%. That leaves annualized 2016 GDP well below 1%. While Germany is doing better than Europe as a whole, if The Continent is garnering any benefit from an undervalued euro, it’s not really on the growth front. Inflation did jump to 1.8% in January, up from 1.1% in December.

The Fed’s two-day meeting begins today. No change in policy is expected, but markets will carefully parse the statement tomorrow in an effort to glean clues as to when (or perhaps if) the next rate hike will be forthcoming.

The BoJ held steady on policy today, as was widely expected. While they remain optimistic about inflation, Kuroda said its premature to start talking about QQE exit strategies.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Buoyed by Falling Stocks, Defensive Dollar

USAGOLD/Peter A. Grant/01-30-17

Gold firmed in early U.S. trading and attempted to regain the $1200 level. While the 1200-handle has been illusive thus far, weaker stocks and a defensive dollar are seen as supportive to the yellow metal.

U.S. stocks are under heavy pressure today, led lower by banking and energy shares. This may just be profit taking in the wake of recent gains, or it could be ongoing uncertainty about the new policies coming out of Washington. If these losses are sustained, today could be the worst day in three-months for both the DJIA and S&P500.

In light of the disappointing Q4 GDP growth announced on Friday — and in particular the big subtraction from foreign trade — the overall health of the U.S. economy is suddenly somewhat suspect. It is likely that another year of sub-2% growth will ultimately be confirmed. So, growth remains anemic, even as inflation is showing signs of picking-up.

When the FOMC commences their two-day meeting tomorrow, this reality will surely be a big part of the conversation. While the Fed is not expected to make any policy changes at this meeting, it will be interesting to see if there are any changes to the statement that might suggest a more dovish bent.

As I suggested last week, it appears like the Fed hiked rates into Q4 weakness again, just as they did in December of 2015. Given that we only got one additional rate hike in 2016, investors are certainly re-calibrating expectations for multiple rate hikes this year. Additionally, the changeover in voting members leaves the FOMC slightly more dovish than that of 2016.

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