Category: Daily Market Report

The Daily Market Report: Gold Firms After First Look At Q1 GDP Disappoints

USAGOLD/Peter Grant/04-28-17

Gold edged higher in the wake of this morning’s advance Q1 GDP disappointment. Silver on the other hand remains on the defense, dropping to a 6-week low of 17.14. That drove the gold/silver ratio to a 10-month high above 73.44.

The BEA reported Q1 GDP at 0.7%, well below expectations of 1.3%. That puts the advance number smack-dab in the middle, between the median expectations and the Atlanta Fed’s GDPNow forecast that was lowered to +0.2% yesterday.

That 0.7% print is the lowest since Q1-14. In this instance, the bad number is largely attributable to a collapsed in consumer spending, which rose just 0.23% in Q1. That’s the smallest increase in spending since 2009. I said it several weeks ago when the March retail sales print was -0.2%:

The FOMC will meet next week, and they are widely expected to hold steady on policy. Focus is really on the June meeting, where the weak GDP data have not had a significant impact on rate hike expectations…yet. Odds of another 25 bps rate hike are holding steady around 67%.

However, in light of 3.5% in Q3-16, 2.1% in Q4-16 and now 0.7% in Q1-17, it sure looks like the Fed is hiking into weakness; just like they did in December of 2015, prompting a year-long pause in the tightening cycle. Additionally, with oil back below $50, price risks have mitigated significantly as well. Does the Fed really have a reason to hike in June?

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

The Daily Market Report: Gold Consolidates Within Yesterday’s Range, Silver Falls Further

USAGOLD/Peter Grant/04-27-17

Gold is consolidating within yesterday’s range amid conflicting fundamentals. Silver on the other hand remains defensive, slipping to a 6-week low and driving the gold/silver ratio to a 5-month high near 73.

Heightened risk appetite in the wake of the French election and the roll-out of the Trump administration’s tax plan is being tempered somewhat by geopolitical tensions, as well as concerns surrounding the specifics of the tax proposal.

Senators received “a long and detailed briefing” on the North Korean situation yesterday. “The military is obviously planning for a number of options, as they should — minimal military action to more significant action,” said Senator Ted Cruz of Texas. North Korea was confirmed as the Trump administration’s top foreign-policy priority.

Critics of the President’s tax plan complain that it is woefully short on specifics. “It’s the beginning of a negotiation but the numbers don’t add up, it’s never going to get through Congress in its current form, it’s completely devoid of detail,’ said Jim Rickerts in a SkyNews interview. Maya MacGuineas, president of the Committee for a Responsible Federal Budget, told the New York Times, “[T]here is no golden goose at the top of the tax-cut beanstalk, just mountains of debt.”

Ms. MacGuineas’s group estimates that Mr. Trump’s plan could reduce federal tax revenue by $3 trillion to $7 trillion over a decade. — NYT

The President’s team contends that the tax cuts will stimulate stronger growth, and hence generate more not less tax revenue. But this isn’t the 1980s, and that idea faces a pretty strong headwind from the demographic realities.

The Atlanta Fed slashed their estimate for Q1 GDP yet again, to a scant 0.2%. Goldmann Sachs is now expecting 1.1% growth in Q1, down from its previous estimate of +1.4%.

We’ll see the Q1 Advance Report from the BEA tomorrow morning. If the GDPNow model is closer to the reality than the current median expectations of +1.3%, the March (and December) rate hike(s) are going to look pretty foolish.


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

Morning Snapshot: Gold remains consolidative

USAGOLD/Peter Grant/04-27-17

Gold continues to consolidate around the 1265.00 level, weighed by the present risk-on environment, but buoyed by a softer dollar, geopolitical risks and some uncertainty about how much of the Trump agenda might actually get implemented. With the French political risks likely unwound, the yellow metal might be staging for a rebound.

The ECB held steady on both interest rates and the QE schedule today, as was widely expected. However, the door remains open for further accommodation: “[I]f the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration.”

There has been speculation this week that a more hawkish tone might be communicated in June, once France has a new President. “We don’t do monetary policy on the likely outcome of elections,” claimed Draghi.

Initial jobless claims rose 14k last week to 257k, above expectations of 241k. Durable goods orders disappointed, rising 0.7% in March, on expectations of +1.2%. The advance trade deficit held steady at -$64.8 bln in Mar, near expectations of -$65 bln.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Consolidates Ahead of Tax Plan Reveal, Meeting on North Korea

USAGOLD/Peter Grant/04-26-17

Gold has stabilized after falling in the wake of the French election outcome. Additional weight was supplied by the U.S. tax reform proposal, which includes a 15% corporate tax rate. Stocks love the idea, which put safe-haven assets on the defensive.

The White House is touting the tax plan as the “biggest tax cut and largest tax reform” in U.S. history. Whether President Trump can get such an ambitious plan through Congress remains to be seen. Republican deficit hawks are already raising questions.

If you subscribe to the formula that each basis point of tax cuts equates to $120 bln in lost tax revenue, we’re looking at a $2.4 trillion in revenue that will need to be found elsewhere. The Trump administration claims it will be offset by growth, the concern is that those moneys will have to be borrowed.

As a real estate developer — comfortable with leverage — the President may not be too worried about adding to our $20 trillion debt, but we as a country have already borrowed far too much prosperity from our future. Will he get the amplified growth he desires, or will corporations just use their new-found tax savings to finance the further consolidation of their industries?

The full U.S. Senate will troop to the White House later today to be briefed by Trump administration national security officials on the situation in North Korea. Focus is likely to be on the threat posed by the DPRK’s advancement in nuclear weapons and delivery vehicles.

North Korea’s arsenal may well hit 50 weapons by the end of Mr. Trump’s term, about half the size of Pakistan’s. American officials say the North already knows how to shrink those weapons so they can fit atop one of its short- to medium-range missiles — putting South Korea and Japan, and the thousands of American troops deployed in those two nations, within range. — New York Times

Whether these concerns rise to the level of warranting a preemptive strike remains to be seen. Perhaps the President is looking to get a feel from the Senate as to whether they have the stomach for such a thing. One smart person suggested yesterday that if the U.S. evacuates military dependents from South Korea, things are really getting serious.

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

Morning Snapshot: Gold consolidates recent losses

USAGOLD/Peter Grant/04-26-17

Gold is consolidating at the low end of this week’s range as French election relief and the proposed U.S. corporate tax cut continues to foster a risk-on environment. Geopolitical risks and a weaker dollar are seen as limiting the downside.

Treasury Secretary Mnuchin, speaking in CNBC this morning, confirmed that the Trump administration would seek a 15% corporate tax rate. Mnuchin claimed the plan would be “the biggest tax cut and the largest tax reform in the history of our country.”

Now we just need to see the details, realizing that a tax cut of this magnitude is also going to take a serious bite out of revenue. Each percentage-point cut is said to equate with $120 bln in tax revenue. You start talking about a 20 bps tax cut and you’re talking about real money.

Today’s U.S. economic calendar is quiet with EIA data and 2-year and 5-year Treasury auctions. Tomorrow the ECB will announce policy.

Posted in Gold News, Gold Views, Snapshot |

Daily Market Report: Gold Remains Defensive as Risk Appetite is Stoked

USAGOLD/Peter Grant/04-25-17

Gold extended modestly lower, exceeding yesterday’s low at 1265.12 as risk assets continue to benefit from the French election results and the prospect of much lower U.S. corporate taxes. The weaker dollar and geopolitical risks continue to offer some support.

“Between the France election and the prospects of corporate tax cuts being proposed in the next few days, it’s clearly a risk-on backdrop.” — Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie Group Ltd

The Trump administration’s pitch for a 15% corporate tax rate has stock market investors all excited, but it strikes me as unlikely such a low rate will actually get through Congress. This could be typical Trump negotiating tactics; ask for the moon and negotiate to some compromise.

Nonetheless, stocks are charging higher and the dollar index has fallen to levels not seen since November. According to Reuters, ECB sources are suggesting there could be a hawkish signal in June.

Three sources on and close to the European Central Bank’s Governing Council told Reuters that with the threat of a run-off between two eurosceptic candidates in France averted, and with the economy on its best run in years, many rate setters see scope for sending a small signal in June towards reducing monetary stimulus. — Reuters

The next ECB policy announcement is Thursday, but they are widely expected to hold steady. Even so, there could be some sense of relief communicated that might be a harbinger of a more hawkish tone in June.

In Japan however, BoJ Governor Kuroda sees QE continuing for some time. Kuroda said a stronger yen could delay attainment of their 2% inflation goal, so of course that’s the last thing the BoJ wants.

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

Morning Snapshot: Gold retests yesterday’s post French election lows

USAGOLD/Peter Grant/04-25-17

Gold remains defensive as markets reverse out the French election risks, and look ahead to the May 7 run-off, where centrist candidate Emmanuel Macron is expected to handily beat Marine Le Pen. Investors will be watching the polls closely in the weeks ahead to see if Le Pen can narrow the differential.

Weakness in the dollar that is associated with the rebound in the euro will help to limit the downside in gold. Elevated geopolitical tensions provide an underpinning to the yellow metal as well.

North Korea staged a massive artillery drill today to celebrate the anniversary of their army’s founding. So far, no ballistic missiles or nukes have been tested. Meanwhile the nuclear submarine USS Michigan arrived in the area.

U.S. consumer confidence, new home sales, Case-Shiller home prices and the Richmond Fed index are out later this morning. Thursday the ECB will announce policy. They are expected to hold steady.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Pressured on Revived Risk Appetite

USAGOLD/Peter Grant/04-24-17

Gold remains lower on the day, as “risk-on” seems to be the order of the day following the French election results. However, the yellow metal is already more than $10 off the intraday low, buoyed by persistent geopolitical risks and a weaker dollar.

The outcome of the French election was pretty much as expected, with Macron and Le Pen advancing to the May 7 run-off. Europhile centrist Macron is widely expected to be the winner of that contest, which has reignited risk appetite amid a belief that there is little chance of a Frexit vote under his leadership.

Gains in the euro have pushed the dollar lower, with the dollar index engaged in a retest of the late-March low at 98.86. A breach of this level would mark a 6-month low in the greenback, providing additional support for gold.

North Korea is threatening to sink the USS Carl Vinson carrier group, while China is asking for both the DPRK and U.S. to exercise restraint. Chinese President Xi reportedly said that he “hopes all parties remain restrained instead of intensifying the situation.”

There is speculation that tomorrow’s anniversary of the Korean People’s Army on Tuesday will be marked by either a nuclear or ballistic missile test. That could be the provocation that elicits a military response from the U.S.

Meanwhile, in the Middle East, the top U.S. general in Afghanistan suggested that the Russians may be providing material support, including weapons, to the Taliban. If found to be true, it would be a serious escalation of tensions between the U.S. and Russians.

Oil prices have extended to the downside for a fourth consecutive day, touching the $49 level for the first time in about a month. The retreat in energy prices undermines the Fed’s contention the inflation is picking up, further tempering rate hike expectations for June.

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

Morning Snapshot: Gold falls on revived risk appetite after French election

USAGOLD/Peter Grant/04-24-17

Gold retreated below the 1270 level as global risk appetite surged in the wake of the French election results. As anticipated, Emmanuel Macron and Marine Le Pen will advance will advance to the run-off election on May 7, with the former favored to win.

This is the first time in more than sixty-years that the two main political parties in France do not have a candidate in the run-off, reflecting the ongoing dissatisfaction with the political status quo. To the relief of many, at least one of the finalist is a euro-friendly centrist that started his own party to get into the race.

The revived risk appetite has caused the euro and equities to surge. The dollar index fell to pressure the 98.86 low from late March, which has limited the downside in the yellow metal somewhat. Persistent geopolitical tensions continue to help underpin gold as well.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Firms Into Weekend and French Election

USAGOLD/Peter Grant/04-21-17

Gold has rebounded intraday to approach the 5½-month highs set early in the week. Silver on the other hand remains defensive below $18, pushing the gold/silver ratio to a 14-week high approaching 72.

Gold is being underpinned by persistent geopolitical risks and uncertainties associated with the French election this weekend. Silver may be suffering from renewed worries over disinflation as oil gives back most of the gains accrued over the over the previous 3-weeks.

Crude has plunged more than 7% this week after gains earlier in the month stalled ahead of the important $55 level. Rising U.S. production and concerns that the OPEC production cut agreement — and perhaps OPEC itself — will fall apart, have all weighed on oil.

A sustained drop in energy prices will further temper inflation expectations, that are already on the ropes in the wake of the weak CPI data that were reported last week. The dimming of price risks has tempered rate hike expectations, driving U.S. yields lower and contributing to a weaker dollar over the past two weeks.

Fed Vice Chair Fischer told CNBC today that he still sees three rate hikes this year, but added “we’re not tied to three.” He expressed concern — as Janet Yellen has recently — about the slowing economy. The Atlanta Fed’s GDPNow forecast for Q1 is a scant +0.5%.

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

Morning Snapshot

USAGOLD/Peter Grant/04-21-17

Gold is maintaining a consolidative tone as the week comes to an end. Geopolitical concerns continue to offer support, as does uncertainty surrounding the French election on Sunday.

French election polls have narrowed considerably in recent weeks, turning it into a close four-way race. With anti-euro candidates on both sides of the political spectrum that have pledged Frexit referendums, nobody seems to be considering what happens if those candidates — Le Pen and Melenchon — advance to the May run-off election. That would certainly shake things up on the Continent, and give the eurocrats in Brussels a case of the vapors!

Flash Markit PMIs for both manufacturing and services are out later this morning, along with existing home sales for March.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Consolidates Ahead of French Election

USAGOLD/Peter Grant/04-20-17

Gold is consolidating after tests of the upside earlier in the week faltered ahead of $1300. The highs from Monday and Tuesday at 1292.30/1295.46 now provide intervening resistance.

The underlying bias remains positive, given heightened geopolitical tensions and the looming French elections. The first round is to be held this coming Sunday and the run-off between the two top finishers is slated for May 5.

Of the five candidates, two have pretty strong anti-euro leanings and have pledged to hold a Frexit referendum if elected. Those two candidates are Marine Le Pen and Jean-Luc Melenchon. The former has been a front-runner throughout the campaign, but the latter has made a late surge. Centrist europhile Emmanuel Macron has been the other front-runner and he would be the choice of those in Brussels . . . if they could vote.

Right now, the race is too close to call, which could make this a very exciting weekend. The European press and polling has pretty consistently believed that Le Pen and Macron will advance to the final and that Macron will ultimately prevail.

However, hearkening back to the U.S. election in November, we all know how wrong the press and polls can be. Perhaps even more-so than U.S. voters, the French are fed-up with the political status quo; both in Paris and in Brussels. This could be an exciting couple of weeks.

U.S. Secretary of State Rex Tillerson is reportedly considering putting North Korea back on the list of State-sponsors of terror. That would further isolate Pyongyang and either force them to negotiate, or prompt them to lash out.

“We are reviewing all the status of North Korea both in terms of state sponsorship of terrorism, as well as all the other ways we can bring pressure to bear on the regime in Pyongyang to re-engage, but re-engage with us on a different footing than the past talks have been held,” Tillerson said. That last part means that the U.S. is no longer willing to exchange aid for nuclear concessions.

North Korean responded by threatening a “super-mighty preemptive strike,” which suggests they are not ready to come to the bargaining table just yet.

In the case of our super-mighty preemptive strike being launched, it will completely and immediately wipe out not only U.S. imperialists’ invasion forces in South Korea and its surrounding areas but the U.S. mainland and reduce them to ashes.” — State-run newspaper, Rodong Sinmun
Posted in Daily Market Report, Gold News, Gold Views |

Morning Snapshot: Gold consolidates below 5½-month highs

USAGOLD/Peter Grant/04-20-17

Gold is consolidating around the 1280 level, just off the 5½-month highs set earlier in the week at 1292.30/1295.46. A weaker dollar, as well as persistent geopolitical tensions are seen as supportive.

Initial jobless claims rebounded last week and the Philly Fed index missed expectations significantly. Leading indicators for March is out later this morning. Median expectations are +0.2%.

Fed Governor Powell is speaking on regulatory issues in Washington, DC this morning. He did mention in his opening remarks that while the economy has recovered from the financial crisis, he is concerned about weak growth.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Retreats Into Range, but Fundamentals Support

USAGOLD/Peter Grant/04-19-17

Gold took another dip right before the London fix, just as it did yesterday. Both sells were reported to be around 25,000 contracts, or $3 bln in notional value. Yesterday’s retreat was fully retraced and then some. So far today, gold is nearly $10 off the intraday low at 1273.20.

Technicians are watching a downtrend line drawn of the all-time high and someone may have a vested interest in not seeing that line breached. On the spot chart, the trendline has already been negated, although a move above $1300 would lend credence to the breakout.

Despite the intraday pullback, a plethora of fundamental factors continue to offer support to the yellow metal: Rising geopolitical tensions. New Brexit uncertainty associated with the snap election called yesterday. French elections. U.S. growth risk. Ebbing rate hike expectations. And calls for a weaker dollar by President Trump.

That all conspires to generate a rather considerable tailwind for the gold market.

There was more saber rattling from North Korea this week. “If the US is planning a military attack against us, we will react with a nuclear pre-emptive strike by our own style and method,” threatened DPRK Vice-Foreign Minister Han Song-ryol earlier in the week.

Without a delivery vehicle capable of reaching the U.S., presumably that nuclear strike would be against a U.S. regional ally; South Korea or Japan. Any such move would likely result in all-out war.

Certainly, we hope that the situation can be deescalated, but there seems to be a death of ‘cooler-heads’ at this point. Hopefully China can pressure Pyongyang to back down.

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

Morning Snapshot

USAGOLD/Peter Grant/04-19-17

Gold is modestly corrective after Monday’s high at 1295.46 successfully capped gains yesterday. However, geopolitical tensions, growth risks, ebbing rate hike expectations and a weaker dollar all conspire to underpin the yellow metal. Gold is already off the intraday lows, as dips continue to be seen as buying opportunities.

The calendar is pretty light today with just the Fed’s Beige Book and EIA crude data. We’ll also hear Fedspeak from Boston Fed hawk Rosengren.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Buoyed by Weak Dollar and Stocks

USAGOLD/Peter Grant/04-18-17

Gold has rebounded from modest intraday losses to pressure the 5½-month high at 1295.46 that was established yesterday in overseas trading. A weaker dollar and weaker stocks are helping to push the yellow metal higher.

Rising geopolitical tensions continue to contribute to safe-haven demand as well. Reports today suggest the U.S. military is considering shooting down North Korean missile tests. While that may display U.S. intercept capabilities, it just might further escalate the situation.

Russia is seeking to meet with U.S. and UN officials in Geneva next week, presumably to lessen deescalate the situation regarding Syria. However, a bilateral meeting last week between U.S. Secretary of State Rex Tillerson and Moscow yielded nothing.

U.S. data were mixed today, with housing starts for March disappointing and industrial production slightly exceeding expectations. The long U.S. recovery since the financial crisis remains uneven at best.

Last week’s dip in CPI has tempered June rate hike expectations notably. This is adding to pressure on the dollar, which took a hit based on President Trump’s perception that the greenback is too strong.

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

Morning Snapshot: Gold continues to consolidate recent gains

USAGOLD/Peter Grant/04-18-17

Gold continues to consolidate the recent push to 5-month highs. Similarly, silver is consolidating after hitting a 5-month high of 18.64 in overseas trading yesterday.

The dollar remains defensive in the wake of President Trump comments last week and speculation that “strong dollar policy” is dead. Reuters reports that

Goldman Sachs abandoned the two strong dollar plays in its 2017 trading recommendations on Tuesday, pointing to the Trump administration’s concerns over the strength of the currency and improvement in growth in rival economies. — Reuters

A sharp decline in housing starts in March is also helping to underpin the metals. Industrial production comes out later this morning. Median expectations are +0.4%. We’ll also hear FedSpeak from Ester George.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Remains Well Bid after Setting New 5-month Highs Overnight

USAGOLD/Peter Grant/04-17-17

Gold remains generally well bid, amid geopolitical risks and rising concerns about the true health of the U.S. economy. While trading remains thin today due to the Easter Monday holiday, both the fundamental and technical biases remain to the upside.

The dollar remains defensive in the wake of last week’s comments by President Trump, regarding his concerns about the strength of the greenback. See our Week in Review video for a detailed examination of this topic.

One might surmise that talk of the Trump administration abandoning the so-called “strong dollar policy,” has rather bullish longer-term implications for gold. That is probably true, but anyone remotely tuned-in to the FX market knows that the “strong dollar policy” is and always has been a farce.

Trump’s about-face on Janet Yellen — she’s apparently no longer “toast” — suggests he just may be prepared to align the Fed toward a weaker dollar. Trump gets to appoint three members to the Fed’s board of governors, and I would anticipate doves based on his admission to The Wall Street Jpurnal: “I do like a low-interest rate policy, I have to be honest with you.”

If the current tightening bias comes to an end, that would be a good omen for gold as well. The prospects for a June rate hike have dropped significantly on the heels of Trump’s comment and a bout of rather weak economic data last week that further lowered Q1 growth prospects.

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

Morning Snapshot: Gold neared $1300 overseas

USAGOLD/Peter Grant/04-17-17

Gold extended to the upside in overseas trading to hit yet another 5-month high at 1295.46, before retreating back to near unchanged on the day. Most European markets are closed today for Easter Monday, so trading conditions remain thin.

Geopolitical tensions remain elevated, offering a solid underpinning to the gold market. Vice President Pence showed up in South Korea near the DMZ over the weekend to warn that the era of “strategic patience” with North Korea is over.

Rumblings of a possible preemptive strike against North Korea continue. Meanwhile, the Russians, Syrians and Iranians have all warned the U.S. against further strikes in Syria.

Additionally, the U.S. economy continues to sputter, offering additional support for gold. We saw further downward revisions to Q1 growth forecasts in the wake of Friday’s drop in retail sales and CPI. This morning, the NY Empire State Index plunged to 5.2 in April, well below expectations of 15.0, vs 16.4 in March. Nearly all of the post-election gains have new been erased.

Posted in Gold News, Gold Views, Snapshot |

Morning Snapshot: Gold market closed, but fundamentals remains supportive

USAGOLD/Peter Grant/04-14-17

Most markets are closed today in observance of Good Friday, so gold is not trading. However, there were some significant U.S. data releases that would have likely pushed the yellow metal higher.

U.S. retail sales fell 0.2% in March, below expectations of unchanged, versus a negative revised -0.3% in February (was +0.1%). Retail sales ex-auto were unchanged, on expectations of +0.2%. That makes two consecutive monthly declines, despite robust consumer sentiment. So, consumers are apparently very optimistic . . . but not enough to actually buy anything . . .

U.S. CPI fell 0.3% in March, below expectations of unchanged. Annualized consumer inflation slowed to 2.4% from 2.7% in February.

Core CPI was -0.1%, on expectations of +0.2%. That’s the first decline in core inflation since January 2010. The annualized pace of core consumer inflation slowed to 2.0% from 2.2% in February.

Now, one month of data do not necessarily mean the reflation trade has come to an abrupt end, but it is cause for concern. Today’s data will lower expectations of future Fed rate hikes and will lead to downward revisions to Q1 GDP forecasts.

Along with the economic concerns, geopolitical risks remain elevated as well. Use of the very large MOAB ordinance against an ISIS position in Afghanistan heightens tensions in the middle east. Meanwhile, North Korea continues to hint at a possible nuclear test. There is speculation that the U.S. may launch a preemptive strike and the North Koreans have said they will retaliate if that were to happen. The Chinese are ramping-up pressure on Pyongyang in an apparent effort to defuse the situation.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold and Silver Well Bid Into Long Holiday Weekend

USAGOLD/Peter Grant/04-13-17

Gold is consolidating the latest round of gains before the long holiday weekend. U.S., UK and most European markets are closed tomorrow in observance of Good Friday.

Both gold and silver legged higher yesterday, boosted by a falling dollar after President Trump once again expressed some concerns about dollar strength in an interview with The Wall Street Journal.

“I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me.” — Donald Trump

If Trump wants a weaker dollar, he has a pretty easy remedy at hand. There were two vacant Fed Board of Governor positions when Trump took office in January. A third position opened up with the resignation of Daniel Tarullo in February.

President Trump could appoint “doves” — those that favor more accommodative monetary policies — to these open positions, shifting the overall bias of the central bank. “I do like a low-interest rate policy, I have to be honest with you,” Trump told The Wall Street Journal. His appointment would likely be in line with that bias.

Mr. Trump also seems to be walking-back expectations that Janet Yellen will not be invited to stay on as Fed chair when her term expires on January 31, 2018. “I like her, I respect her,” said Trump. During his campaign he had said, “I would most likely replace her because of the fact that I think it would be appropriate.”

Why the change of heart with regard to Yellen and more general monetary policy? I think there is probably a growing realization in the President that given our massive debt burden and his goal of achieving 4% growth, tighter policy and the dollar strength that comes along with it, are counterproductive.

This is something that seemed incredibly obvious from the very beginning: Trump’s tax cut and spend policies could never really work in a tighter monetary policy environment.

A MarketWatch headline this morning proclaims: Why did Trump flip flop on Yellen? She may be the dove he needs. Precicely! And I think several more doves on the Board of Governors would give Yellen the cover she needs to revert to her true-self . . . an unabashed dove.

I think in several months we’ll be looking back on Trump’s interview with the WSJ as a watershed moment; where the administration indicated that it was moving toward syncing its fiscal plans with monetary policy. This is bullish for gold and silver, and could be very bullish if they are successful.

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

Morning Snapshot: Gold and silver remain well bid, despite rebound in dollar

USAGOLD/Peter Grant/04-13-17

Gold remains firm near 5-month highs, despite the rebound in the dollar. Silver is also well bid, having taken out the February high at 18.48 in late trading on Wednesday.

Both gold and silver surged yesterday after President Trump said he the dollar is “getting too strong.” That knocked the greenback lower, inciting the precious metals to rally. While about half of those dollar losses have been retraced, gold and silver are holding their gains. That’s significant.

Initial jobless claims fell 1k last week. A rebound in claims of 10k had been expected.

PPI fell 0.1% in March. It was the first drop in 7-months. Core PPI came in unchanged, on expectations of +0.2%.

Preliminary Michigan Sentiment for April comes out later this morning. Median expectations call for a downtick to 96.8.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Remains Well Bid Near 5-Month Highs

USAGOLD/Peter A. Grant/04-12-17

Gold remains well bid in the wake of solid gains on Tuesday. The yellow metal is now up more than 10% year-to-date. Silver is up more than 15% on the year, despite the fact this is has been unable to take out its previously established high from February at 18.48.

According to Janet Yellen, the Fed is pivoting from stimulus to sustain mode, even as considerable growth risks persist. The WTO sees global growth between 1.8 and 3.6% this year, amid “deep uncertainty” about economic and policy developments.

Perhaps not surprisingly, the WTO is particularly worried about weak global trade. “[T]rade growth remains fragile and there are considerable risks on the downside. Much of the uncertainty around the outlook is political,” said WTO director-general Roberto Azevedo.

IMF President Christine Lagarde weighed in as well: “There are clear downside risks: political uncertainty, including in Europe; the sword of protectionism hanging over global trade; and tighter global financial conditions that could trigger disruptive capital outflows from emerging and developing economies.”

Yellen herself sounded a bit of an alarm on Friday in saying, “The fact that you can create that many jobs in the context of growth that is so low points to a significant problem.” She must realize that tighter monetary policy is unlikely to invigorate productivity or growth; in fact, it may have the exact opposite impact.

Any help that the Fed might have been hoping for on the fiscal side seems to be fading fast. President Trump who seemed inclined to move on to tax reform after his healthcare plan stalled in Congress, told Fox Business this morning that he wants to “do healthcare first.” As for Trump’s infrastructure spending plan, that remains “up in the air,” according to his special assistant for infrastructure policy.

Why then is the Fed tightening into actual weakness and mounting growth risks? My guess is that the Fed wants some clearance above the zero-bound so that they can have a policy response that hopefully doesn’t include a negative Fed funds rate, or a return to QE, in the event of a recession.

If the Fed is forced to reverse course and start easing, it would be an admission that massive monetary stimulus for nearly a decade was a failure. It would confirm that negative real rates may just be here to stay, which would trigger additional strong interest in gold.

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

Morning Snapshot: Gold consolidates Tuesday’s gains

USAGOLD/Peter A. Grant/04-12-17

Gold is consolidating yesterday’s solid gains, but that move to new highs for the year and the close above the 200-day moving average keeps focus on the upside. Silver still needs to negate resistance marked by the February high at 18.48.

Geopolitical risks are the primary driving force at this point. The reception of U.S. Secretary of State Rex Tillerson in Moscow was reported to be “icey.” Tillerson warned the Russians that they risk becoming irrelevant in the Middle East by continuing to support Assad. The Russians warned Tillerson that the U.S. should not strike Syria again. Sounds less than productive.

U.S. import prices fell 0.2% in March, but export prices rose by 0.2%. Price risks remain uneven at best.

Later this morning we’ll see EIA crude stocks and hear FedSpeak from Dallas Fed hawk Kaplan. The Bank of Canada will also announce policy. They are widely expected to hold steady.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Surges to Reestablish Uptrend

USAGOLD/Peter A. Grant/04-11-17

Gold has surged to new highs for the year, buoyed by heightened geopolitical concerns and mounting worries that President Trump domestic agenda has stalled. Silver is on the mend as well, presently up nearly 2% on the day.

If the yellow metal is able to sustain today’s gains, it will record the much anticipated definitive close above the 200-day moving average. That will be a rather bullish technical event, returning considerable credence to the uptrend that emerged in the wake of the December 14, 2016 rate hike.

On the geopolitical front:

Deteriorating relations between the U.S. and Russia — centered on the Syrian conflict — are at the fore. Secretary of State Tillerson is meeting in Moscow with Russian officials, but it remains unclear if he will get an audience with Putin.

The U.S. is also ramping-up pressure on North Korea, even as Pyongyang is apparently preparing for yet another nuclear test. A U.S. carrier strike group has been rerouted to the Korean peninsula. The Chinese reportedly moved troops to their border with North Korea to deal with refugees and ‘unforeseen circumstances’ in the event that the U.S. launches a preemptive strike.

The upcoming French elections are cause for concern as well. Earlier predictions that populist Marine Le Pen would win in the April 23rd first round and then lose in the May 7 run-off remain suspect. If Le Pen pulls an upset, the fate of the EU could hang in the balance.

FedSpeak from Janet Yellen yesterday was rather interesting, as she indicated that policy was shifting from stimulus to sustaining what the Fed has already accomplished. Admittedly, they have helped foster one of the longest economic recoveries in quite some time, but is also one of the weakest.

Yellen was generally optimistic, saying that she expected continued moderate growth. However, this recovery is very long-in-the-tooth and the Atlanta Fed’s GDPNow forecast for Q1 was downgraded last week to just 0.6%.

To be fair, the Fed chair continues to express concerns about growth. Amidst yesterday’s optimism Ms. Yellen dropped this little bombshell: “The fact that you can create that many jobs in the context of growth that is so low points to a significant problem.” Yellen identified that problem as “productivity growth is very low.”

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

The Daily Market Report: Gold Rebounds from Earlier Intraday Losses

USAGOLD/Peter A. Grant/04-10-17

Gold rebounded into positive territory, trading more than $10 off the intraday low. However, the short term tone remains generally consolidative after last week’s gains faltered just above the previous highs for the year.

Rising geopolitical tensions, both in the middle east and in Asia are likely to keep the yellow metal underpinned. News that the U.S. was rerouting an aircraft carrier to the Korean peninsula and rumors that the Chinese were moving troops to the North Korean border conspired to keep markets on edge.

The rhetoric in the wake of last week’s U.S. missile strike against Syria remains elevated as well. “I hope Russia is thinking carefully about its continued alliance with Bashar al-Assad, because every time one of these horrific attacks occurs, it draws Russia closer into some level of responsibility,” said Secretary of State Rex Tillerson. It seems unlikely that Russia will drop its support of the Assad regime, but Tillerson travels to Moscow later this week.

Suddenly foreign policy issues seem to have pushed the Trump domestic agenda to the back burner, raising further doubts about the “reflation trade” that had U.S. equities so optimistic in the wake of last year’s election.

In fact, Congress is on break for the next two weeks. When they return toward the end of the month, the first order of business will be to address the debt ceiling in order to prevent a government shutdown. Both parties seem to be working toward a stopgap measure to fund the government through September, but let us not forget that the national debt is about $20 trillion currently and is destined to go higher yet.

The GOP may take another swing at healthcare reform when they return, despite President Trump indicating that he is prepared to move-on to tax reform. However, if divisions within the Republican party surface once again, stocks may be vulnerable to a full retracement of the gains recorded post-election. That should provide additional support for gold.

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

Morning Snapshot: Gold returns to consolidative stance

USAGOLD/Peter A. Grant/04-10-17

Gold is maintaining a consolidative tone after failing to sustain the move to new highs for the year on Friday. The fundamentals remain broadly supportive, which should limit the downside.

In particular, heightened geopolitical tensions between the U.S. and Russia over the Syrian situation should continue to foster safe-haven interest. Chinese state-run media was also critical of the U.S. attack on Syria, but only after President Xi had returned to China.

The Xinhua account of the Trump/Xi meeting did not mention North Korea, although both Presidents apparently agreed that the North Korean threat was “very serious”. Secretary of State Rex Tillerson reiterated that the U.S. would take its “own course” if China did not do more to rein in North Korea.

“President Xi clearly understands, and — and I think agrees, that the situation has intensified and has reached a certain level of threat that action has to be taken,” Tillerson said on Face the Nation yesterday. The USS Carl Vinson carrier strike group is reportedly been diverted toward the Korean Peninsula.

There is nothing on the U.S. economic calendar today. Fed chair Yellen is participating in a panel discussion at the University of Michigan.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Surges to New Highs for the Year

USAGOLD/Peter A. Grant/04-07-17

Gold remains well bid, having cleared key resistance at 1263.87 on haven buying in the wake of the U.S. cruise missile strike on Syria. Today’s nonfarm payrolls miss offered further support as June rate hike expectations ebbed.

Nonfarm payrolls came in at just +98k for March, well below market expectations of +200k. February was negatively revised to +219k, from +235k previously. The unemployment rate dropped to 4.5%, as the labor force participation rate held steady at 63%. Hourly earnings was in line with expectations at +0.2% and the average workweek held steady at 34.3 hours.

June rate hike expectations based on Fed funds futures dipped to about a 50/50 proposition. Meanwhile, the Atlanta Fed’s expectations for Q1 GDP tumbled to 0.6%.

Stocks aren’t quite sure what to do. The defense sector is up on heightened geopolitical expectations. The prospect for fewer rate hikes this year may provide some buoyancy as well. However, the weak jobs data and mounting growth risks could weigh on consumption, which would be a negative for stocks.

The U.S. strike on Syria may have gotten the meeting between President Trump and President Xi off on the wrong foot. Xi has not made an official comment on the attack yet, but China has generally sided with Russia and the Assad regime in the Syrian civil war. If nothing else, perhaps Xi will view Trump’s tough talk about North Korea with an additional degree of credibility.

From trade policy to North Korea, from Taiwan to the South China Sea, the list of possible topics for their talks Thursday and Friday is about as long as it is thorny. — NPR

Silver remains well bid as well, but has been unable to break-through its high for the year set in February at 18.48. However, with the 200-day moving average already negated and key resistance in gold now out of the way, silver may be poised for a charge higher.

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

Morning Snapshot: Gold Clears Key Resistance Following U.S. Missile Strike

USAGOLD/Peter A. Grant/04-07-17

Gold is sharply higher in the wake of the U.S. cruise missile strike against Syria. Key resistance at at 1263.87 has been negated, establishing new highs for the year. This also constitutes a definitive breach of the 200-day moving average, which is at 1256.67 today. A close above this level would be a bullish technical event.

Silver is pressuring the February high at 18.48 and has already recorded multiple closes above its 200-day MA. Look setup looks constructive for further gains.

March nonfarm payrolls are out shortly. Median expectations are +200k jobs. The unemployment rate is expected to hold steady at 4.7%.

Also on the agenda is the meeting between Presidents Trump and Xi. Trade, North Korea and China’s activities in the South China Sea will all be high on the agenda. I suspect the U.S. strike on Syria will be discussed as well.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Consolidates, Awaiting Jobs Data and Trump/Xi Meeting

USAGOLD/Peter A. Grant/04-06-17

Gold continues to consolidate within the recent range, awaiting tomorrow’s jobs report and news of this weekend’s meeting at Mar-a-Lago between President Trump and China’s President Xi. Silver is consolidating at the high end of its range as well, still within striking distance of the high for the year — set in February — at 18.48.

The minutes of the last FOMC meeting, released late yesterday, were rather interesting:

The Fed acknowledged that the stock market was overvalued. According to the Fed, “Some participants viewed equity prices as quite high relative to standard valuation measures.” That’s couched FedSpeak for “bubble”.

While the Fed still seems to be on track for multiple rate hikes this year, whether there are two more or three more is still subject to some debate. Additionally, there was the first real hint of balance sheet normalization, although they only talked about talking about it:

Participants also generally agreed that the Committee should begin discussions at upcoming meetings about the economic conditions that could warrant changes in the existing policy of reinvesting proceeds from maturing Treasury securities and principal payments from agency debt and mortgage-backed securities, as well as how those changes would be implemented and communicated. — Minutes of January 31-February 1, 2017 FOMC meeting

The media latched on to this point, trumpeting that the Fed wants to start unwinding its massive $4.5 trillion balance sheet. At this point anyway, they haven’t agreed to anything other than future discussions about maybe winding down reinvestments. Balance sheet normalization is likely to be a long drawn-out process.

The NY Fed (they run the balance sheet) projects full reinvestment will continue through mid-2018, after that they will be phased out over the next year. Normalization of the balance sheet is expected to occur in late 2021.

The Federal Reserve’s securities holdings then decline until the portfolio reaches its normalized size in the fourth quarter of 2021. At that time, the domestic securities portfolio is estimated to be about $2.8 trillion, with a slightly higher concentration in Treasury securities than in agency MBS. — NY Fed

So, it looks like the plan is to only take the balance sheet down by about $1.5 trillion over the next four years to 2011/2012 levels and calling things “normalized”. However, we’re already overdue for a recession, which would likely change everything. Ah, the best laid plans . . .

There is also speculation that the Fed would likely slow rate hikes if they shifted focus to the balance sheet. Either way, whether by rate hikes or balance sheet unwinding, the recession risk is amplified as monetary policy is tightened.

Former Fed insider Danielle DiMartino Booth wonders if Trump appointments to the Fed might change things as well:

It’s just a hunch, but a less-threatened Fed could just as easily be expected to back down on shrinking the balance sheet. Given where the economy looks headed, newly empowered doves might even be inclined to grow the balance sheet anew. — Danielle DiMartino Booth.

Mentioning balance sheet unwinding may just be a bone tossed to the hawks. We’ll have to wait and see if there is further and more serious discussion at future meetings. For now though, uncertainty abounds and broaching the subject seems to have further muddied the guidance.

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