Category: Daily Market Report

The Daily Market Report: Gold Backs-Off From Highs for the Year Again

USAGOLD/Peter A. Grant/03-18-17

Gold slipped back into the range after failing to take-out the high for the year at 1263.87. The yellow metal is being weighed upon by rebounds in the dollar and stocks. However, the greenback remains defensive for the month of March, and in fact going back to the beginning of the year when the dollar index peaked at 103.82. Since that time, the DX is off nearly 4%.

Silver remains resilient, holding gains above $18, which may bode well for the underlying trend in gold as well. Silver has definitely been leading on the upside since the healthcare reform bill failed to clear the House last week, raising concerns about President Trump’s broader agenda.

Janet Yellen spoke today in Washington, focusing on job training. She did not provide any queues as to monetary policy moving forward.

Vice Chair Fischer confirmed that the Fed is watching political developments closely and seems disinclined to count any ‘fiscal chickens’ before they’ve hatched. He thinks two more rate hikes this year seems reasonable.

Esther George and Robert Kaplan towed the company line, expressing some optimism about the economy, but reiterating that Fed tightening will be slow and steady. The Atlanta Fed’s GDPNow model calls for 1% growth in Q1. While the “Blue Chip Consensus” is higher, it has been trending lower since late-February and moved below 2% recently.

The economy remains far from robust. While Esther George noted that we are in the midst of one of the longest economic expansions in history, it has been tepid at best. One has to wonder what tools remain at the Fed’s disposal when the expansion ends. Because it will end . . .

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

Morning Snapshot

USAGOLD/Peter A. Grant/03-28-17

Gold remains well bid after pressuring the high for the year yesterday. The yellow metal is higher this morning, within striking distance of resistance 1261.01/1263.87. The 200-day moving average is at 1258.87 today.

The dollar and stocks remain defensive and yields are still under pressure. This all conspires to keep gold underpinned.

Advance goods trade deficit narrowed to -$64.8 bln in February. The Case-Shiller home price index rose in January by 0.9%, above expectations. Later this morning we’ll see consumer confidence and the Richmond Fed Index.

Fed Chair Yellen speaks at the Community Reinvestment Conference in Washington at 12:30ET. There is also FedSpeak from Esther George, Robert Kaplan and Jerome Powell.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Surges, Buoyed by Lower Yields and a Weaker Dollar

USAGOLD/Peter A. Grant/03-27-17

Gold surged higher in overseas trading, buoyed by mounting concerns that the U.S. reflation trade is on the ropes. The high for the year at 1263.87 was pressured, but has successfully contained the upside thus far.

Nonetheless, a weaker dollar and lower yields should continue to underpin the yellow metal. The dollar index tumbled through important support at 99.23, establishing 4-month lows. Those losses lend some credence to the scenario that suggests the top is in for the dollar. That would be a positive for gold.

Certainly if the stock market rolls over — based on diminished optimism that President Trump will be able to advance his broader agenda — that too would be gold positive. If the delay of fiscal stimulus also causes the Fed to back-off from their anticipated 3 to 4 rate hikes this year, then gold could really be off to the races.

A sustained move to new highs for the year would also constitute a decisive breach of the 200-day moving average, returning considerable credence to the long-term uptrend. Further gains, or even consolidation at these levels, will continue to drag the 50-day moving average higher as well, toward a potential “golden cross.”

Keep an eye on silver as an indicator as well. Silver surged back above $18 for the first time in 4-weeks. Silver remained well bid, even as gold retreated into the intraday range, as the gold/silver ratio continues its retreat from above 71.00.

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

Morning Snapshot: Gold surges to approach highs for the year

USAGOLD/Peter A. Grant/03-27-17

Gold is up sharply as Friday’s healthcare debacle threatens to delay and possibly delay President Trump’s entire agenda. The yellow metal jumped to within striking distance of the high for the year at 1263.87 from February.

Silver has reclaimed the $18 handle. With the gold/silver ratio back below 70, it may be time for silver to play a little catch-up.

The dollar came under pressure on the uncertain political backdrop and falling yields, as there is now considerable doubt as to whether the Fed will get the fiscal help they likely were anticipating. Additionally, Angela Merkel’s CDU party emerged victorious in regional elections, dispelling some concerns about her hold on power. The euro surged to 4-month highs, putting additional pressure on the greenback.

The U.S. calendar is light today with the March Dallas Fed Index and a $26 bln 2-year note auction. We also will hear FedSpeak from Evans, Praet and Kaplan.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Well Bid Heading Into Weekend

USAGOLD/Peter A. Grant/03-24-17

Gold is heading into the weekend trading slightly higher on the day and just off the three week high set yesterday at 1253.31. The yellow metal is presently up 1.8% on the week and appears poised for a second consecutive winning week.

Focus remains on Capitol Hill, where passage of the GOP’s healthcare bill remains very much in doubt. President Trump has reportedly asked for a vote today regardless, but I suspect Republican leadership is loath to risk such a defeat this early in the Trump administration.

However, even if they go back to the drawing-board to attempt more palatable legislation, it would suggest to markets — especially stocks — that the Trump agenda is probably way overbought. If stocks roll-over, gold will likely benefit from continued safe-haven flows.

“We should see some safe haven flows into gold if [Trump] can’t get it passed because it means all his other programs have a low probability of succeeding.” Societe Generale’s Robin Bhar

If the reflation trade is suspended, one has to wonder how the Fed will react. FedSpeak today continues to be rather optimistic, but I suspect they were actually hoping for a little fiscal help this year. If those hopes are diminished on the healthcare reform flop, the central bank may have to take a more dovish stance to ward off a stock market collapse and possibly even recession.

The Atlanta Fed’s GDPNow model now projects 1.0% growth in Q1. While that’s slightly better than the 0.9% forecast from March 16, it is hardly reflective of the “good clip” referenced by NY Fed President Dudley today.

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

Morning Snapshot: Gold remains firm at high end of recent range

USAGOLD/Peter A. Grant/03-24-17

Gold corrected modestly overseas before returning to unchanged on the day. The yellow metal appears poised to score a second consecutive higher weekly close on a weaker dollar and worries that healthcare reform may stall the broader Trump agenda.

GOP leadership opted not to put AHCA to a vote in the eleventh-hour yesterday because they didn’t seem to have the votes. They’ll try again today, but considerable doubts remain as to whether the votes are there.

The gold market seems nonplussed by the February durable goods orders. Later this morning we’ll see Flash Markit manufacturing and services PMI. FedSpeak is due from Evans, Bullard and Dudley today.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Underpinned as Focus Shifts to AHCA Vote

USAGOLD/Peter A. Grant/03-23-17

Gold remains generally well bid, although earlier tests above important resistance at 1250 have faltered. While continued weakness in the dollar should limit the downside in the yellow metal, a bit of a reprieve in the stock market is probably limiting the upside.

Everyone is keyed on the AHCA House vote today as a proxy for President Trump’s broader reflation agenda. The feeling being that as goes the AHCA vote, so goes deregulation, tax reform, trade deals and fiscal stimulus. Pretty much everything that had markets so excited in the wake of last November’s election results.

The best case is that the reflation trade gets delayed for some period of time as the GOP sorts out their differences on healthcare. The worst case would be a complete derailing of the Trump agenda.

The biggest casualty of such an outcome would probably be the stock market, which went from bubbly to positively frothy in recent months. We have already seen risk appetite dissipate this week, to the benefit of Treasuries and gold as safe haven buying ramped up. If AHCA fails to clear the house, those trends are likely to accelerate.

The most recent speculation suggest somewhere between 27 and 32 Republican representatives are either hard “no”, or leaning “no”. If accurate, AHCA will not pass. Rather than allowing that to happen, leadership would likely postpone the vote in the hope of building additional support.

However, that too would be seen as a negative outcome. Stocks would likely fall. Treasuries would rally, pushing yields lower. That would put additional pressure on the dollar. All of that would be positive for gold.

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

Morning Snapshot: Gold pushes to new 3-week highs on continued dollar weakness, jobless claims miss

USAGOLD/Peter A. Grant/03-23-17

Gold continues to track higher, establishing new three-week highs in the wake of this morning’s bigger than expected jump in initial jobless claims. With the dollar still under pressure, focus now shifts to the February high in the yellow metal at 1263.87.

Also on the calendar today is February new home sales and FedSpeak from Janet Yellen. However, the day’s big event will be the initial House vote on the new healthcare bill.

Despite the solid GOP majority in the House, infighting among Republicans makes passage questionable at best. If the AHCA fails to clear the House on this vote, there are legitimate worries that the entire Trump agenda will stall.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Edges Higher as “Reflation Trade” Seen in Jeopardy

USAGOLD/Peter A. Grant/03-22-17

Gold is edging higher, setting new three-week highs above 1250.00. U.S. yields are under pressure, which is dragging the dollar lower as well. Stocks remain defensive after dropping sharply on Tuesday.streaming movie Split

As investors pare their optimism on the great Trump reflation, one must wonder what they were really wishing for in the first place. The Fed has been trying to reflate the economy via extraordinary measures for nearly a decade, largely with little to no impact. That may have been because the central bank was getting no help on the fiscal side of the equation.

The election of Donald Trump, along with GOP majorities in both houses of Congress, triggered expectations that the long awaited fiscal stimulus was on its way. Those expectations have been tempered recently as initial efforts by Republicans to amend healthcare legislation may not have the necessary votes to clear the House tomorrow. Gennadiy Goldberg of TD Securities argued that such an event would spark “a significant risk-off event.”

The concern is that if healthcare gets bogged down, the broader reflation agenda is going to be delayed as well. Gold typically fares quite well in a risk-off environment.

But even if the reflation is successful, what will be the cost? The U.S. is currently $20 trillion in debt; that’s more than twice the $9.2 trillion national debt of a decade ago. “There is practically no chance that debt will stabilize or decrease,” wrote Gary Christenson for Sprott Money. Christenson suggests that devaluation of the dollar is the only option. Historic precedent is certainly on his side.

Debt will increase, currencies will devalue, and central banks will “print” to keep the financial systems moving and markets rising, if they can. How much more debt can the system accommodate? — Gary Christenson

That’s a good question. And he’s not just talking about America. Debt is on the rise the world over. It’s like we learned absolutely nothing from the financial crisis, which at its core was a debt crisis. In the subsequent years, governments just borrowed more to paper over the problems of the past. That can only go on so long.

Gold is the ideal hedge, whether we get the much anticipated inflation, or continued disinflation. Christenson thinks prices will bubble higher, “sooner rather than later.”

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

Morning Snapshot: Gold remains firm

USAGOLD/Peter A. Grant/03-22-17

Gold remains well bid near three-week highs. The yellow metal remains underpinned by a weaker dollar, lower yields and defensive stocks.

On top of last week’s less hawkish than expected Fed, concerns continue mounting that the new healthcare bill might not fair so well when it faces its initial House vote tomorrow. If the AHCA stalls, the worry is that the rest of the Trump administrations agenda will bog down as well. Stocks in particular don’t seem to like that prospect.

The MBA mortgage market index fell 2.7% last week as rates rose into the FOMC meeting. The January FHFA home price index and February existing home sales are out later this morning.

Crude oil remains under pressure after a sizable API stock build. EIA data are out later this morning. If the OPEC production cut inspired rally is over and lower prices are in the offing, inflationary pressures that the Fed has been touting may fail to materialize.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Jumps as Dollar, Stocks and Yields Fall

USAGOLD/Peter A. Grant/03-21-17

Gold is extending to the upside, boosted by a falling dollar, stocks and yields. The 61.8% retracement level the decline from the February high — mentioned in this morning’s Snapshot — has been exceeded, lending additional confidence to the rebound that commenced with last week’s Fed decision.

There seems to be mounting concern that the GOP’s Obamacare repeal and replacement plan may stall in Congress, which in turn may derail the broader reflation agenda of the Trump administration. Republicans made significant amendments to the bill yesterday, hoping to shore up support within their own party. Obviously there will be little to no support from the other side of the aisle.

President Trump was on Capitol Hill today encouraging Congress to pass the AHCA so that he and they can move on. The market seems to be losing some of the confidence that built in the wake of Trump’s February 28th speech to a joint session of Congress. If Thursday’s House vote reveals a fractured majority party, quote a bit more of the post-election stock rally could be vulnerable to retracement as trade deals, deregulation, tax reform and infrastructure spending get backburnered until healthcare is sorted out.

FedSpeak from KC Fed President Esther George wasn’t terribly hawkish. She acknowledged that low rates can lead to imbalances, although she apparently didn’t mention anything specifically (like stocks!). Nonetheless, her softer tone and the fact that she tempered balance sheet normalization expectations is probably contributing to pressure on yields and the dollar.

Minneapolis Fed President Neel Kashkari took to Twitter in an #AskNeel segment, where he continued to defend his decision to dissent on last week’s rate hike:

I agree with him, that higher rates is not going to help the economy grow faster. In fact, GDP data for Q4-16 and Q1-17 seem to suggest higher rates are weighing on growth. That shouldn’t surprise anyone.

Kaskari also suggested that inflation is “much more likely” to be below 2%, noting that the Fed has “powerful tools to keep inflation from getting too high.” He also warned that when “inflation takes off, terrible economic outcomes” ensue.

Our own Mike Kosares wrote a stellar piece early in the month with the subtitle: Don’t look now but inflation and a new gold rush might be in our future. It is a must read and is linked below.

Will banks’ excess reserves fuel a new monetary crisis?

The prospect of the banks unleashing from $12 trillion to $36 trillion in currency and easily accessed deposits — presently held as excess reserves with the Fed — on the economy has got to keep a guy like Kashkari up at night . . .

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

Morning Snapshot: Gold buoyed by weaker dollar

USAGOLD/Peter A. Grant/03-21-17

Gold is consolidating near the high end of the recent range, buoyed by a weaker dollar. More than half of the decline from late-February into the FOMC meeting — driven largely by hawkish FedSpeak — has now been retraced. The 61.8% retracement level was pressured yesterday.

The rebound is being driven by the fact that the reality of the FOMC statement and projections did not live up to the hawkish hype. FedSpeak yesterday from Evans and Harker suggests the Fed is going to give this another go, and try to rebuild inflation and rate hike expectations. At least initially, investors don’t seem to be buying full Bastille Day 2016 film online

KC Fed’s Esther George and Cleveland Fed’s Loretta Mester speak later today. Both lean hawkish to begin with, so I would look for them to suggest four hikes remain on the table for this year.

U.S. Q4 current account gap narrowed to -$112.4 bln, well inside expectations of -$128.2 bln, vs revised -$116.0 bln in Q3 (was -$113.0 bln). This is likely to result in a positive Q4 GDP revision, but it strikes me as a bit odd. ZeroHedge noted that it was an 8 standard deviation miss! That’s pretty huge, so color me skeptical.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Well Bid as FedSpeak Continues to Focus on Inflation

USAGOLD/Peter A. Grant/03-20-17

Gold remains generally well bid, having built modestly on last week’s solid gains. The yellow metal is pressuring resistance marked by the high from the first week of March at 1236.80. Above that, the highs for the year at 1263.87 would be back in play.

The market is still reacting to what some are referring to as the Fed’s “dovish rate hike” from last week. Nonetheless, the minions were out today trying to rebuild expectations for inflation and at least three rate hikes this year, and possible four.

“I think three is entirely possible, as I gain more confidence in the outlook I could support three total this year. If inflation began to pick up, that would certainly solidify my report. It could be three, it could be two, it could be four if things really pick up.” — Chicago Fed President Charles Evans

Philadelphia Fed President Patrick Harker seems to be expecting hotter inflation as well, as he talked up the prospects for at least three rate hikes this year:

“We are moving in the right direction. There will be a little bit of an overshoot and that’s ok. It’s appropriate.” — Philly Fed President Patrick Harker

Inflation indicators have indeed been edging higher in recent months, but the inflation expectations component of the University of Michigan’s sentiment index tumbled to a record low in March. It seems we’re still getting some mixed readings on price risks . . .La La Land 2016 streaming

One thing seems certain, if it is going to be inflation, the Fed will remain behind the curve. And if the real rate of inflation remains negative, gold should remain underpinned.

Keep in mind, that whether we ultimately end up with stagflation, or more disinflation is in our futures, gold is the ideal hedge in either case. With gold still below its recent highs, now might be a great opportunity to bolster one’s hedges for the long-haul.

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

Morning Snapshot: Gold firm as protectionism worries weigh dollar

USAGOLD/Peter A. Grant/03-20-17

Gold starts the first week of Spring generally well bid. The yellow metal has added modestly to last week’s gains as investors digest the outcome of the weekend G20 meeting.

For some G20 partners the refusal of the US to commit itself clearly to free trade marked the first step down a dangerous road. — Financial Times

Worries about protectionism are keeping the dollar on the defensive. According to a Reuters article, the Chinese government is already planning to retaliate against any trade penalties initiated by America. There could be a trade war brewing.

Britain’s EU ambassador, informed the office of Donald Tusk, EU Council president, that Teressa May will trigger Article 50 on March 29. That will formally begin the Brexit process.

Chicago Fed dove Evans was out today trying to rebuild inflation worries after the University of Michigan inflation expectations gauge fell to a record low last week. Evans said that three rate hikes this year were likely, but a fourth is possible should inflation pick up.

Posted in all posts, Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Poised for Solid Weekly Gain

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

Gold remains firm, poised for its first positive weekly close in three-weeks. The yellow metal rebounded smartly on Wednesday after the Fed announced policy and economic projections, extended higher yesterday and is maintaining the bulk of those gains today.

Minneapolis Fed dove Kashkari reiterated why he dissented on this week’s rate hike, noting that inflation remains below the Fed’s target and that slack in the labor market remains. He also said the Fed should come up with a plan to start reducing the balance sheet before raising rates further.

“I dissented because the key data I look at to assess how close we are to meeting our dual mandate goals haven’t changed much at all since our prior meeting,” said Kashkari. However, the FOMC statement specifically cited “realized and expected” inflation as a reason for the rate hike.

While the University of Michigan sentiment index (prelim) rebounded to 97.6 in February, the inflation expectations component tumbled to a record low! “[R]eal people’s expectations of inflation in the medium-term has collapsed to its lowest on record,” noted ZeroHedge.

In the latest massive setback for the Federal Reserve, which is desperate to break the recent “deflationary mindset” to have gripped the US population (see Japan for the results), long term inflation expectations declined to the lowest level since 1980: an annual rate of 2.2% was expected in the next five years, down from 2.5% last month and 2.3% in December. Just 6% expected long term deflation. These lows were supported by the fewest complaints of rising prices eroding their living standards—just 6%, the lowest since 2002 and barely above the all-time low of 4%. — ZeroHedge

That all seems a little incongruous to me. If the UM inflation data are to be believed, the risk of inflation is probably a lot smaller than the Fed would have you believe. So why is the Fed raising rates on alleged inflation concerns?film Hush 2016

Read the FT article I posted earlier this morning entitled A blind spot masks the danger signs in finance. The gist is that in keeping rates so low, policymakers were perpetuating economic gloom and a “deflationary mindset.” In raising rates, they are perhaps trying to inspire some optimism and inflation. Think of it as some monetary policy jujitsu . . .

Either that, or there is a legitimate concern that inflation is brewing and may explode onto the scene at any moment. One explanation for how that might happen was proffered by our own Mike Kosares in the March newsletter. If you haven’t read his piece yet, I encourage you to do so:

Will banks’ excess reserves fuel a new monetary crisis? Don’t look now but inflation and a new gold rush might be in our future

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

Morning Snapshot: Gold remains firm going into weekend

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

Gold remains well bid heading into the weekend. The yellow metal was boosted this week after the Fed raised rates in line with expectations, but indicated that they will maintain a slow and steady tightening path.

This is all very similar to the rate hikes in December 2016 and December 2015. The forward guidance was the same and gold rallied in response.

U.S.industrial production, University of Michigan consumer sentiment and leading indicators all come out later this morning. Industrial production is expected to rebound, sentiment should remain firm and leading indicators are expected to weaken. Another mixed bag.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Adds to Yesterday’s Solid Gains

USAGOLD/Peter A. Grant/03-16-17

Gold remains well bid in the wake of yesterday’s post-FOMC surge. The yellow metal came within striking distance of last week’s high at 1236.80 before fading somewhat.

Gold rallied in response to yesterday’s Fed rate hike, just as the previous two rate hikes were closely correlated to bottoms in the price of gold. “It is a case of ‘sell the rumor (of a rate hike), buy the fact’,” said Ross Norman of Sharps Pixley. ‘Again,’ I would add . . .

The rate hike itself was pretty universally priced in, but apparently the market was expecting the forward guidance to be a little more hawkish. In light of quite hawkish FedSpeak that drove expectations in recent weeks, the market almost certainly was not anticipating a dovish dissent.

Minneapolis Fed President Neel Kashkari voted against the rate hike, favoring instead steady policy. Kashkari noted that inflation remains below target and the job market is likely still not operating at its full potential. As near as I can tell, the last Fed dissenter opposing a rate hike, was Governor Mark Olson at the September 20, 2005 FOMC meeting, 11-1/2 years ago.

With Fed action off the table, probably until June, focus now shifts to U.S. fiscal and trade policies, the debt ceiling and the French elections. It may be months before we see actual fiscal reforms and the debt ceiling will have to be addressed at that point as any infrastructure plan is going have to be debt financed.

While the eurocrats in Brussels breathed a collective sign of relief over the outcome of the Dutch election, their worry should now shift to France. The first round of the French election is next month and then the final round is in May. Marine Le Pen remains in contention and has pledged to have a vote on France leaving the EU should she win.

Additionally, the FT warns that the debate over “Italy’s future in the currency bloc and a possible “Italexit” [is] gathering pace at what euro supporters fear is an alarming pace.”

“Italy is wounded and the hegemonic powers — France and Germany — are buying it up piece by piece. This operation is almost colonial.” — Prof. Alberto Bagnai

Markets and politicians seem to be largely ignoring risks associated with the debt ceiling. We’ve been here before and Congress always comes through with an 11th-hour hike to — or suspension of — the debt ceiling. One of these times though, they might take things a little too far.

“Gold will remain attractive for investors globally due to the heightened geopolitical risks,” said Evie Lamprou of asset manager China Post Global. There doesn’t seem to be end in sight for that particular set of risks.

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

Morning Snapshot: Gold builds on yesterday’s gains

USAGOLD/Peter A. Grant/03-16-17

Gold is extending to the upside, adding to the solid gains notched in the wake of yesterday’s Fed decision. The dollar is under pressure after the Fed raised rates, but the tenor of the statement and presser were less hawkish than some were expecting.

The previous two rate hikes also triggered strong rallies in gold. If those rallies are any indication, there is further upside potential this time around as well.

The dot plots point to ongoing modest growth, below target inflation and hence only two more rate hikes this year. In light of sub-2% growth last year and a deteriorating outlook for Q1, one might reasonably wonder why the Fed is tightening at all . . .

Housing starts were stronger than expected in February. The Philly Fed retraced much of the big January gain, but still came in higher than expected. Initial jobless claims for last week were near expectations.

Dutch PM Rutte beat the populist candidate yesterday, somewhat easing worries about the EU falling apart. Next up: The French elections in April and May.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Steady Ahead of Fed, Even as Q1 Growth Prospects Deteriorate Further

USAGOLD/Peter A. Grant/03-15-17

Gold is holding steady ahead of the looming Fed decision. Intraday dips below $1200 have been limited and short-lived.

The Fed is expected to raise rates by 25 bps when they announce policy at 2:00ET. Markets have priced in that expectations over the past couple weeks.

Markets are going to react to the tenor of the policy statement and the economic projections, along with Janet Yellen’s responses under questioning during the press conference. I’m going to be particularly interested in the growth projections in relation the the expectation of multiple rate hikes this year.

Ms. Yellen told Congress last month that growth is “quite disappointing.” I’d ask her if that’s still the case and if higher rates are likely to improve the growth prospects, or cause them to deteriorate further.

Investors are also curious to see if President Trump responds to the anticipated tightening of policy. As I wrote yesterday, he might have a legitimate beef:

A new President shooting for 4-5% growth might reasonably wonder why the Fed is acceleration its tightening now, given that annualized growth in 2016 was a scant 1.6%. In addition, the Atlanta Fed further trimmed its Q1 GDP projection to 1.2% last week.

The Atlanta Fed’s GDPNow model for Q1 growth deteriorated further to 0.9% today, down from 1.2% last week and a high from early in the year of 3.4%. It seems like the prospect for sub-1% growth in Q1 should give the Fed pause, but the market doesn’t seem to think they will be dissuaded.

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

Morning Snapshot: Gold consolidates, awaiting Fed policy decision

USAGOLD/Peter A. Grant/03-15-17

Gold is consolidating around $1200 ahead of this afternoon’s Fed decision. A 25 bps rate hike is baked in the cake. Focus will be on the policy statement verbiage, the economic projections, forward guidance and what Chair Yellen has to say.

CPI accelerated in February to a 2.7% annualized pace, versus 2.5% in January. Again, given persistently tepid growth, inflation is likely the primary motivator for tighter policy.Watch movie online The Transporter Refueled (2015)

If hotter inflation is in the offing, gold should do well. However, if the Fed is going to keep hiking to keep inflation in check, they will sacrifice growth in the process.

Retail sales rose just 0.1% in Feb, which was in line with expectations. The strength seen in January was not perpetuated. The Empire State index and the NAHB Housing Market Index both beat expectations.

The Fed policy statement is out at 2:00ET. The economic projections and Yellen’s presser follow.

Posted in all posts, Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Consolidates Above $1200 as Fed Deliberates

USAGOLD/Peter A. Grant/03-14-17

Consolidative trading prevails with the two-day FOMC meeting underway. The yellow metal is slightly higher, but a breakout of the recent range seems unlikely until after the Fed’s policy statement comes out tomorrow.

The Fed is expected to hike the Fed funds rate by 25 bps and the market has that priced in. The forward guidance will hold the most interest for the market tomorrow as the try to discern the timing of future rate hikes.

The market will also be interested in the Fed’s economic forecasts — despite their abysmal track record: Do they see inflation exceeding the 2% target? Do they expect growth to remain anemic?

There is also some mounting concern about how President Trump might react to tighter policy, given the dampening effect on growth. A rate hike tomorrow would be the second since Mr. Trump was elected (the first since he actually took office), versus only one other (Dec 2015) going all the way back to 2006!

A new President shooting for 4-5% growth might reasonably wonder why the Fed is acceleration its tightening now, given that annualized growth in 2016 was a scant 1.6%. In addition, the Atlanta Fed further trimmed its Q1 GDP projection to 1.2% last week.

The U.S. central bank is holding its breath waiting for a tweetstorm from President Donald Trump they are sure is coming. — MarketWatch

“Already there are mutterings from the GOP that the Fed is going to take away the punchbowl under Trump but it didn’t under Obama,” pointed out MarketWatch’s Greg Robb. The Fed expert he was interviewing acknowledged that the central bank was probably on “thin ice” with the Trump administration.

On top of all this drama, we’ll also see the debt ceiling reinstated on Thursday. There is talk that the President may use that as leverage to push through some of his other initiatives.

For Trump, the debt ceiling could emerge as tempting leverage to demand concessions, especially as Senate Democrats keep threatening to block his priorities in Congress. — Bloomberg

After a couple sessions of relative calm, the next 48-hours could be anything but! It has been proven time and time again that the calm before the storm is the best time to get your gold hedge on.

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

The Daily Market Report: Gold Consolidates on First Day of Busy Week

USAGOLD/Peter A. Grant/03-13-17

Gold is consolidating around $1200 on the first day of a rather busy week. There is a raft of data out this week, but the primary focus is on Wednesday’s Fed policy decision and their economic forecasts. Fed Chair Yellen will also hold a press conference.

A 25 bps rate hike is widely expected and priced into the market. It will be the forward guidance proffered within the statement itself, or during the presser that is likely to have the most influence on markets.

Perhaps flying a little under the radar is the fact that the debt ceiling gets reinstated this week as well. “As you know, the Bipartisan Budget Act of 2015 suspended the statutory debt limit through Wednesday, March 15, 2017. Beginning on Thursday, March 16, 2017, the outstanding debt of the United States will be at the statutory limit,” wrote Treasury Secretary Mnuchin. The Secretary urged Congress to raise the debt ceiling “at the first opportunity.”

Despite the national debt fast approaching $20 trillion, Congress is not expected to address the debt ceiling immediately. That will leave Treasury to employ extraordinary measures in order to prevent a breach of the debt ceiling.

There has never been a debt ceiling that our representatives in Washington could not ultimately exceed. The debt ceiling will ultimately be raised — because it always is — but it will be interesting to see how the roles in Congress might be flipped; with Republicans this time arguing that the debt limit must be raised in order to pay for spending already authorized by Congress.

In looking at the above chart, it’s as if we learned nothing at all from the financial crisis, which at its core was a debt crisis. And it’s not just America: “Since 2007, China has added $24 trillion worth of debt to its collective balance sheet. Over the same period, the U.S. and Europe only added $12 trillion each.” wrote Janus’ Bill Gross in his monthly outlook.

In fact, “the global economy has created more credit relative to GDP than that at the beginning of 2008’s disaster” warns Gross. The Institute for International Finance reported earlier in the year that global debt had risen to more than $217 trillion in the first three-quarters of 2016. Government debt accounted for more than half of the gains. I’ll hazard a guess that total debt rose further in Q4-16, led by government debt.

With the global debt/GDP ratio now well in excess of 325%, one has to wonder at what point a debt load of this magnitude becomes unsustainable. Bill Gross likened the current situation to a “a truckload of nitro glycerin on a bumpy road. One mistake can set off a credit implosion . . .”

What are the implications of rising interest rates? How might the Fed and other central banks react at the first signs of the aforementioned “credit implosion”?

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

Morning Snapshot: Gold consolidates above $1200

USAGOLD/Peter A. Grant/03-13-17

Gold starts the week on a consolidative footing, just above $1200. Focus is on Wednesday’s Fed policy decision, where a 25 bps rate hike is widely expected. Also on Wednesday, the suspension of the U.S. debt ceiling is set to expire.

There are a great deal of U.S. economic data out this week as well:

February PPI comes out tomorrow. CPI and retail sales data are released on Wednesday. Housing starts and Philly Fed on Thursday. Industrial production, LEI and Michigan sentiment on Friday.

The UK Parliament is set to pass legislation as soon as tomorrow, that will allow PM May to trigger Article 50. That will allow for formal negotiations to begin with the goal of extracting Britain from the EU.

The dollar fell in overseas trading to a one-week low, but has since rebounded to trade slightly higher on the day. The softer dollar tone should help underpin gold into the FOMC decision.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Steadies Post-NFP

USAGOLD/Peter A. Grant/03-10-17

Gold caught a bit of a bid following this mornings better than expected jobs report, but subsequently lost momentum. The yellow metal is now consolidating just above $1200.

Nonfarm payrolls rose 235k in February, above expectations of 196k. The jobless rate ticked lower to 4.7%, as was expected. Hourly earnings were somewhat disappointing at +0.2% and the average workweek held steady at 34.4 hours.

This pretty much makes a rate hike next week a lock. The FOMC begins its two day meeting on Tuesday, March 14 and will announce policy and their economic projections on Wednesday, March 15. Janet Yellen will also hold a press conference that day and hopefully field some questions about mounting growth risks.

Adding to the volatility today is a Bloomberg article that says “European Central Bank policy makers considered the question of whether interest rates could rise before their bond-buying program comes to an end.” Citing Reuters, ZeroHedge suggested the discussion was apparently brief and without broad support.

Nonetheless, the euro surged to 3-week highs against the dollar as the bund/Tnote spread collapsed. “It’s a bit odd that you would continue to ease with QE and hike rates at the same, so we’re struggling to understand this a bit,” Rabobank strategist Lyn Graham-Taylor told Reuters.

I concur, it seems that if you want to tighten policy, the first thing you do is slow the growth of the balance sheet and then stop asset purchases altogether. And then raise rates. I don’t see that the ECB gains anything in doing it in reverse order; but who says central bankers have to make sense.

So, with even the ECB now reportedly at least cautiously discussing tighter policy, is the global economy and financial system really out of the woods? Janus bond guru Bill Gross thinks not.

In his March Investment Outlook, Gross warns “our highly levered financial system is like a truckload of nitro glycerin on a bumpy road. One mistake can set off a credit implosion . . .”

In the U.S., credit of $65 trillion is roughly 350% of annual GDP and the ratio is rising. In China, the ratio has more than doubled in the past decade to nearly 300%. Since 2007, China has added $24 trillion worth of debt to its collective balance sheet. Over the same period, the U.S. and Europe only added $12 trillion each. — Bill Gross

It’s like we learned nothing at all from the financial crisis and ensuing Great Recession. Instead we borrowed even more aggressively from our collective futures, but never really generated enough momentum to achieve escape velocity.

Now we’re even more leveraged than ever before and one mistake could lead to Bill Gross’ worst case scenario. KABOOM!

As a hedge against that risk, savvy investors are scaling out of overvalued stocks and bolstering their gold holdings. As Gross eludes to in his outlook (citing Will Rogers), the return of your money is far more important at some point than the return on your money. Nothing preserves wealth like physical gold in your procession.

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

Morning Snapshot: Gold firms on NFP beat

USAGOLD/Peter A. Grant/03-10-17

Gold has rebounded back above the $1200 level in reaction to this morning’s better than expected jobs report. Nonfarm payrolls rose 235k in February, above median expectations of +196k. The unemployment rate ticked lower to 4.7%, in line with expectations.

A March rate hike was nearly fully priced in over the past couple weeks and only a bad jobs report could have derailed those prospects. With that threat out of the way, the Fed will almost assuredly announce a 25 bps rate hike next Wednesday. This might be a little front-running of ‘buy the fact’ . . .

Hourly earnings rose 0.2%, below expectations of 0.3%, versus a positive revised +0.2% in January (was +0.1%). Average workweek held steady at 34.4 hours, in line with expectations.

Posted in Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Holding Above $1200

USAGOLD/Peter A. Grant/03-09-17

Gold is maintaining a corrective tone as the market remains focused on tomorrow’s jobs data and next week’s FOMC meeting. A 25 bps rate hike is widely expected at the end of the two-day FOMC meeting on March 14-15.

“While tighter monetary policy is not bullish, inflation and a range of uncertainties, including European elections and protectionism should support the yellow metal. As such, we see prices at $1,400 (per troy ounce) by year-end,” said analysts at Bank of America Merrill Lynch in a research note. However, in saying that tighter policy “is not bullish,” the analysts are not exactly saying that tighter policy is bearish either.

In fact, the last two rate hikes — the only two we’ve seen in more than a decade — have corresponded closely with lows in the gold market. The FOMC statement, economic projections and Yellen’s comments during the presser will be heavily scrutinized as usual in an effort to discern the Fed’s likely path moving forward.

Given my repeated warnings over growth risks, I’m going to be particularly interested to see if there are any negative changes to the central tendencies for the change in real GDP. In December, the Fed was expecting 2017 GDP to be 1.9% – 2.3%. Their longer-run forecast is 1.8% – 2.0%.

Not terribly optimistic and arguably not an environment where a central bank would be looking to raise rates; unless of course they are really worried about inflation. If this is indeed the case — and I think BofA feels the same way — gold should do just fine.

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

Morning Snapshot: Gold remains under pressure ahead of jobs data and FOMC

USAGOLD/Peter A. Grant/03-09-17

Gold is confined to a narrow range, but still defensive ahead of tomorrow’s jobs report and the FOMC meeting next week. The yellow metal has been under pressure over the last two-weeks as as March rate hike expectations — driven by hawkish FedSpeak — moved dramatically higher.

A big nonfarm payrolls miss tomorrow could totally derail those expectations, but if the ADP survey that came out yesterday is any indication, the jobs data are likely to be in-line at a minimum. Growth risks continue to be ignored, so it must be inflation that the Fed is really worried about.

Import and export indexes released this morning likely stoked those concerns further. U.S. import prices rose 0.2% in February, above expectations of +0.1%, versus a positive revised +0.6% in Jan (was +0.4%). Export prices rose 0.3% on expectations of +0.1%, versus a positive revised +0.2% (was +0.1%).

Initial jobless claims rebounded 20k last week, reversing the 19k drop to 44-year lows in the previous week.

The ECB held steady on policy, as was widely expected. While QE will continue and the easing bias is clearly intact, Mario Draghi hinted that a slow move toward a neutral stance was in the offing. We’ll see about that . . .

Posted in all posts, Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Defensive Awaiting Feb Jobs Data, FOMC Decision

USAGOLD/Peter A. Grant/03-08-17

Gold continued its retreat on Wednesday as better than expected jobs data further escalated rate hike prospects. The yellow metal slipped to a five-week low of 1205.80 before stabilizing.

The ADP employment survey for February came in much better than expected at +298k. Consensus was +195k. This creates some upside risk for Friday’s nonfarm payrolls number, which has a median expectation of +196k.

The otter than expected labor data further stoked expectations that the Fed will raise rates by another 25 bps next week. In fact, such a move is fully priced into the market at this point.

What remains to be seen then, is if the Fed is hiking once again into weakening growth. We’ve seen Q1 growth forecasts deteriorate in recent weeks and are presently well below 2%.

So what then you may ask precipitated all the hawkish Fed speak? My guess is that the Fed has become increasingly worried about inflation expectations becoming ‘unanchored’.

Mike Kosares wrote an excellent research piece on this for our newsletter, describing from whence he thinks those inflationary pressures might be coming. If you haven’t done so already, I encourage you to read this piece and be sure to subscribe to our monthly newsletter.

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

Morning Snapshot: Gold slides further on ADP beat

USAGOLD/Peter A. Grant/03-08-17

Gold slid further in overseas trading to five-week lows after the ADP employment survey came in much stronger than expected, perhaps creating some upside risk for Friday’s nonfarm payrolls report. Yields and the dollar are up on heightened rate hike expectations.

The ADP survey came in at +298k on expectations of +195k. Consensus for February nonfarm payrolls is +198k and the jobless rate is expected to tick lower to 4.7%.

A March rate hike was largely unexpected up until a couple weeks ago and then hawkish FedSpeak ramped up considerably. Now it seems all-but a sure thing, even as Q1 growth prospects have eroded.

Q4 productivity was left un-revised at 1.3%, below expectations of a positive revision of 1.5%; Unit Labor Costs held steady at 1.7%.

Wholesale sales data for January comes out later this morning. Expectations are for a 0.7% rise.

Posted in all posts, Gold News, Gold Views, Snapshot |

The Daily Market Report: Gold Defensive as Rate Hike Expectations Dominate, Despite Growth Risks

USAGOLD/Peter A. Grant/03-07-17

Gold slipped below Friday’s low at 1222.10, amid persistent expectations that the Fed will nudge rates higher at next week’s FOMC meeting. So far, secondary support at 1215.80 (15-Feb low) has contained the downside.

If the Fed does indeed announce another rate hike on Wednesday, March 15, it would be just the third such move in more than a decade. Prior to the December 2015 hike, the last rate hike occurred in June of 2006! That’s a long stretch of easing and über-accommodative monetary policy. Truth be told — and the Fed has acknowledged this — monetary policy will remain accommodative even if there are three rate hikes this year.

In fact, Dallas Fed President Robert Kaplan suggested last week that even “a few” rate hikes would leave policy “highly accommodative.” According to Kaplan, normalization (maybe call it the new normalization) would be a Fed funds rate of 2.25% to 2.50%. Such a move would put policy in a neutral state.

But again I ask: What about the growth risks?

Q1 growth prospects dimmed further today, according to the Atlanta Fed’s GDPNow model. The model now sees Q1 annualized growth at just 1.3%, down from 1.8% last week.

In addition, the Commerce Department reported today that the trade deficit surged to a five-year high of -$48.5 bln. The strength of the dollar is major contributor to the growing trade imbalance. A rate hike next week, and the prospect for two more later this year, is only going to offer further support to the greenback.

The Trump administration has made lowering the trade deficit a priority. The President has also spoken out about a dollar that he perceives to be “too strong.” I’m anxious to see the official White House response to today’s data.

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