Category: Daily Market Report

Morning Snapshot: Gold Hits 4-Week Highs, Remains Firm After Today’s Data

USAGOLD/Peter Grant/11-15-17

Gold is up, reaching new 4-week highs above 1288.70. The yellow metal was being buoyed by a weaker dollar and risk aversion going into this morning’s data, and is sustaining those gains post-data.

Geopolitical tensions remain high, with an apparent coup in Zimbabwe adding to the risk-off mindset.

U.S. CPI for October came in pretty much in line with expectations. Headline CPI slowed to a 2.0% annual pace, down from 2.1% in September. Core CPI on the other hand accelerated to 1.8% y/y, versus 1.7% in September. It was the first uptick since January.

That may keep December rate hike expectations elevated, but one uptick in 9-months does not a trend make. I don’t think it will be enough to sway the more dovish members of the Fed that are leaning toward keeping policy on pause through year-end.

U.S. retail sales rose 0.2% in October, above expectations of +0.1%. However, ex-auto rose just 0.1% on expectations of +0.3%. September was revised higher in both instances, but it appears that hurricane distortions are fading.

While gold remains confined to the range that has dominated for the last month, upticks in more recent weeks bode well for renewed tests above $1300. A breach of resistance at 1306.04 (16-Oct high) is still needed to return attention to the high for the year at 1357.50 (08-Sep high).

The bottom of the range at 1263.00/1260.10. This level was reinforced by unsustained tests of the downside earlier in the week. Yesterday’s low at 1269.60 now provides a good intervening barrier.

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Posted in Gold News, Gold Price, Gold Views, Snapshot |

The Daily Market Report: Gold Bounces Off of Short-Term Support, Keeping Range Intact


USAGOLD/Peter Grant/11-14-17

Gold is up slightly ahead of the European close after significant buying interest surfaced in the futures market. The yellow metal bounced from in front of support at 1264.70/1263.10, on what Zerohedge called “massive volume,” leaving the low end of the range at 1260.10 well protected.

Today’s PPI data suggests inflation, at least at the producer level, remains elevated in the wake of the hurricanes. Whether these price pressures are sustainable or not remains to be seen. Additionally, the PPI data may be a harbinger of hotter than expected CPI. Those data are out tomorrow.

While the market sees a December rate hike as a forgone conclusion, although Minneapolis Fed’s Kashkari and St. Louis Fed’s Bullard (non-voter) have expressed opposition. Meanwhile, Philly Fed’s Harker said he has a December hike “lightly penciled in,” suggesting he may be on the bubble.

With Fed funds futures reflecting a 91.5% probability of a rate hike — down slightly from 96%+ recently – arguably the risk is in one direction. If the data disappoints at any point in the next month, there is potential for a pretty significant unwind.

Keep in mind that the Fed went on pause in September because inflation pressures had reversed course. While prices may have firmed back up in September and October, there is some concern that those gains are transitory, even as the central bank would have you believe it is the negative pressures that are transitory.

Gold may be setting up for a win/win situation. If the Fed remains on pause, the dollar will likely come under pressure, boosting gold in the process. If on the other hand, inflation is picking up and is sustainable, gold is of course the classic inflation hedge.

At this juncture, I would suggest the former is the more likely scenario, particularly with the other major central banks maintaining dovish tones. Further policy divergence on the part of the Fed and a continued rise in the dollar would be detrimental to the reflation agenda that is arguably hanging by a thread at this point.

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

Morning Snapshot: Gold Pressured Within Range, Despite Weaker Dollar/Stocks

USAGOLD/Peter Grant/11-14-17

Gold is down in early New York trading, still well within the recent range. However, both the dollar and stocks are also weaker this morning, which should limit the downside for the yellow metal.

U.S. PPI came in hotter than expected in October. Both headline and core rose 0.4%, on expectations of +0.1% and +0.2% respectively. If CPI data beat expectations tomorrow, it will go a long way toward validating the exceedingly high expectations for a December rate hike.

However, if inflation really is picking up, that ultimately will be good for gold. The yellow metal is the classic hedge against inflation.

The dollar index is trading at a three week low on euro strength, after German GDP came in better than expected. While the German economy is humming along, it’s worth noting that German investors are hedging their bets by buying a lot of gold. Smart.

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Posted in Gold News, Gold Price, Gold Views, Snapshot |

The Daily Market Report: Gold Recovers Modestly Within Range


USAGOLD/Peter Grant/11-13-17

Gold is edging higher within the range and has recouped a little more than half of Friday’s intraday losses. Gold came under pressure ahead of the London close on Friday, when 30,000 futures contracts were dumped in about a minute.

The fact that those losses stalled well shy of the range lows at 1263.00/1260.10 offers some encouragement. However, with gold so narrowly confined, a rebound above $1300 is really needed to stoke optimism and return focus to the high for the year set in early-September at 1357.50.

So what might be the catalyst to get that ball rolling? Weak October inflation data this week might do the trick. That may temper December rate hike expectations, which would weigh on the dollar and buoy gold.

Skepticism that Congress will deliver tax reform legislation to the President’s desk by year-end might prove to be a catalyst as well. Many agree that U.S. stocks are overvalued, but that condition is arguably acute if corporate tax cuts will be significantly delayed; or perhaps not happen at all. If stocks roll-over, gold will likely catch a safe-haven bid.

Finally, there are the geopolitical risks. The inflammatory rhetoric seems to have escalated once again in the waning days of President Trump’s diplomatic tour of Asia.

The President has said there would be a major announcement this week on North Korea. Meanwhile, South Korea is apparently concerned that another DPKR missile test is imminent.

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Morning Snapshot: Gold Edges Up Within Range

USAGOLD/Peter Grant/11-13-17

Gold is up modestly, attempting to retrace Friday’s sharp intraday sell-off. Just about half of those losses have been recovered, but the yellow metal remains well contained within the recent range.

A softer dollar and weakness in stocks are offering support to gold. Focus remains on political uncertainty surrounding the House and Senate versions of tax reform legislation. There are concerns about the reconciliation process; what might ultimately reach the President’s desk and when that might happen.

Not much on the economic calendar today, but we have important inflation data coming out this week. October PPI is out tomorrow, with expectations calling for further slowing to 2.3% y/y. CPI is out on Wednesday. A small m/m increase is expected, which will likely result in a downtick to the annualized rate. Core CPI is expected to hold steady at 1.7% y/y.

The market continues to see a Fed rates hike next month as a given, despite persistently soft inflation. However, those expectations may be tempered if further weakness is evident in the October data. That would likely put the dollar under additional pressure, offering further support to gold.

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Posted in Gold News, Gold Price, Gold Views, Snapshot |

The Daily Market Report: Gold Retreats in Repeat of Last Friday’s Price Action


USAGOLD/Peter Grant/11-10-17

Gold is down intraday after a large sell order hit the futures market, knocking the yellow metal back into its well defined range. Zerohedge reported that someone sold 30,000 contracts ($4.2 bln notional value) in just a 1 minute period.

That’s about 10% of the average volume for an entire day. We’ve seen this before though and as we’ve pointed out in the past, it smacks of agenda driven selling.

I’m comfortable saying that because we never see this sort of nonsense on the long side of the gold market. A real trader doesn’t dump 30,000 contracts in a minute if he or she is looking to short at the best price, or close out a big long position at the best price.

Today’s price action prompts me to point you to the Dave Kranzler article I posted yesterday: Gold And Silver: Something Different Is Occurring. Kranzler discusses the open interest situation that has developed that typically has lead to one of these “take-downs.”

Historically this is the signal that the Comex banks will implement what I call a “COT open interest liquidation” take-down of the gold/silver price using Comex paper to trigger hedge fund stop-loss positions. This enables the Comex banks to cover their shorts and print huge profits. It’s also illegal trading activity but that’s for another day.

As I pointed out earlier in the session, today’s price action was eerily similar to what unfolded last Friday around the same time. Kranzler commented on the 03-Nov price action:

Unloading on the price of gold like this on a Friday, after the rest of the trading world – and specifically the physical-buying eastern hemisphere markets – has closed for the weekend, is typical. What is not typical, however, is the reversal of the price of gold which occurred the next trading day (Monday).

Today’s intaday sell-off stalled well shy of last Friday’s low at 1264.70, perhaps lending credence to Mr. Kranzler’s overarching theme that “something different is occurring.” These assaults on the gold price are becoming less effective.

It’s going to be interesting to see what impact today’s selling had on open interest, and perhaps more importantly, if buyers once again view this action as a gift come Monday. With key U.S. inflation data on tap next week, there is some potential for further expansion of at least the range, within the range, within the range.

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Morning Snapshot: Gold Adopted More Positive Tone Within Range This Week

USAGOLD/Peter Grant/11-10-17

Gold is slightly lower after having set 3-week highs in the previous 2 sessions. The yellow metal is garnering support from a modest pullback in the dollar and softer stocks, as doubt arose about the prospects for timely passage of the GOP tax reform legislation.

The Senate version delays the corporate tax cuts until 2019 and has more tax brackets than the House version. There is some concern that reconciliation is going to be contention and may prevent the legislation from reaching the President’s desk before year-end.

If the Trump administration fails to notch a significant legislative victory this year, any remaining momentum they have may be lost. That might put Republican congressional majorities in jeopardy next year, signalling the end of Trump’s pro-business, reflation agenda.

If that is the way things unfold, the U.S. stock market would be vulnerable to a serious correction. Safe-haven assets like gold would come back in favor and one might reasonably expect the Fed to reverse recent policy tightening.

Today’s U.S. calendar includes preliminary consumer sentiment for November and October Treasury budget. Next week’s data has October PPI and CPI. Both are expected to remain soft, which may raise some doubts about the true prospects for a December rate hike.

While gold adopted a more positive tone this week within the well-defined range, a convincing move back above $1300 is still needed to return a measure of confidence to the uptrend that has dominated most of this year. On the downside, support is well defined at 1263.00/1260.10.

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The Daily Market Report: Gold Price Resilient, Despite Soft Demand Data


USAGOLD/Peter Grant/11-09-17

Gold is up modestly, reaching yet another 3-week high, but still well within the broader range that has been in place since early-October. A pullback in the dollar and a sharp drop in stocks are both helping to underpin the yellow metal today.

Further reports today that the Senate version of tax reform will delay the corporate tax cuts until 2019 — along with Democrat election wins earlier this week — have created some doubts that the tax package will get passed at all. If tax reform fails, GOP Congressional majorities are possibly in jeopardy next year.

If the GOP loses one or both houses of Congress in the 2018 elections, the pro-business Trump administration will be severely hamstrung. In which case, stocks are waaaaaaay overvalued.

Additionally, the debt ceiling is back in play a month from today and with everyone focused on tax legislation, the impending threat of a government shutdown is on the back-burner. Bloomberg warns that we should Get Ready for a Washington Train Wreck in December.

If what we’re seeing today is an early indication that volatility is returning to markets, the investor complacency that has held sway in recent years is likely to come to a screeching halt. In that environment, safe-haven assets like gold are going to be back in favor.

This quote from former Fed VC Fischer leapt to mind today, as it speaks to complacency. If these words of wisdom hold true for the world’s central bankers, they certainly hold true for the individual investor as well.

“…if I may be permitted a few final words on my way out the door, the watchwords of the central banker should be ‘Semper vigilans,’ because history and financial markets are masters of the art of surprise, and ‘Never say never,’ because you will sometimes find yourself having to do things that you never thought you would.”

The World Gold Council’s Gold Demand Trends for Q3 are getting a lot of play in the press today. An FT headline blared that it was a “tough quarter for gold as demand slides to 8-year low.”

The third quarter saw a 9% year-on-year (y-o-y) drop in gold demand to 915 tonnes (t). Year-to-date (y-t-d) demand was down by 12%. ETFs had another quarter of positive inflows, but at 18.9t, they fell far short of the 144.3t influx in Q3 2016. A softer quarter in the jewellery sector (-3%) accounted for 17t of the y-o-y decline. Demand from other sectors firmed: central banks bought a healthy 111t of gold (+25% y-o-y) while bar and coin investment strengthened by 17% (to 222.3t), albeit from a low base. — WGC

However, when you look at the price of gold, you wouldn’t necessarily deduce that demand is down. The price of gold is up 11.7% y-t-d and only down 2.7% versus the third quarter of last year. If you go back 8-years, gold ended Q3-09 at $1007.25. That means the yellow metal is up nearly 28% since the last time demand was this “low”.

In the face of recent dollar gains and the persistent march higher for equities, gold has actually proven to be remarkably resilient. The WGC pointed out that “gold remained an important risk-hedge, but the market lacked a catalyst.” While it may be too early to tell for sure, the catalyst that will drive gold through the upside of its range may in fact be emerging.

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Morning Snapshot: Gold Edges Higher to Another 3-Week High

USAGOLD/Peter Grant/11-09-17

Gold is up modestly in early U.S. trading, buoyed by a weaker dollar and a drop in stocks. The yellow metal has set a new 3-week high at 1288.19. Silver remains narrowly confined within the recent range, trading just above $17.

The next minor tier of resistance for gold is at 1291.08. A breach of this level would bode well for further tests above $1300.

Initial jobless claims for last week were higher than expected. Later today we’ll see September wholesale sales. There will also be a $15 bln 30-year bond auction.

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Posted in Gold News, Gold Price, Gold Views, Silver News, Silver Price, Silver Views, Snapshot |

The Daily Market Report: Gold Sets 3-Week Highs, Buoyed by Technicals/Geopolitical Tensions


USAGOLD/Peter Grant/11-08-17

Gold is up at a 3-week high in U.S. trading as upside momentum in the dollar and U.S. stocks has waned somewhat. The U.S. economic calendar has been quite thin this week, providing little direction to markets in general.

The break of the initial resistance level at 1284.20 is encouraging, but $1300 must really be reclaimed to return confidence to the underlying uptrend that has dominated this year. The yellow metal held above the 200-day moving average and is now back above the 100-day and 20-day, returning a measure of credence to that uptrend.

While today’s gains may be technically inspired, geopolitical tensions continue to be seen as supportive. While President Trump arguably toned down the saber-rattling in his address to the South Korean national assembly, he warned North Korea “Do not underestimate us. AND DO NOT TRY US.” He also revealed that there was a U.S. “nuclear submarine” in the region.

The President is suggesting that our allies in the region buy “massive” amounts of U.S. military hardware to bolster their defenses and serve as a deterrent. However, that is not likely to sit well with China.

Mr. Trump is in China through Thursday and will reportedly be discussing means to contain North Korea with President Xi. Chinese trade practices, that President Trump has deemed “unfair” — will also be on the agenda.

Jim Rickards suggested in a recent interview that he sees war with North Korea as a very real possibility. Obviously this has potentially dire implications for South Korea and Japan and would likely send gold soaring on safe-haven demand.

Meanwhile, tensions escalated in the middle east after Yemeni rebels fired an Iranian made missile into Saudi Arabia. “We see this as an act of war,” said the Saudi Foreign Minister. Saudi Arabia threatened retaliation, saying that the country “reserves its right to respond to Iran in the appropriate time and manner, in accordance with international law and based on the right of self-defense.”

Gold is the classic hedge against geopolitical uncertainty and tensions are running pretty hot right now between two nuclear powers. Do you have enough protection, in the form of physical gold, should the unthinkable happen?

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Morning Snapshot: Gold and Silver Firmer Within Recent Ranges

USAGOLD/Peter Grant/11-08-17

Gold is higher in early U.S. trading, probing the high end of the range within the range within the range. That first tier of resistance is marked by last week’s high at 1284.20. Above that, 1306.04 and 1357.50 define the high ends of the broader ranges. The low end of the ranges are well defined at 1263.00/1260.10

Silver is higher, trading just above $17. Resistances to watch are at 17.26 and 17.47. The latter is likely a trigger for a push back above $18.

Today’s calendar is very light with only EIA crude data from last week. There is a $23 bln 10-year note auction as well.

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Posted in Gold News, Gold Price, Gold Views, Silver News, Silver Price, Silver Views, Snapshot |

Morning Snapshot: Gold Ease Slightly Within Range

USAGOLD/Peter Grant/11-07-17

Gold is slightly lower today after yesterday’s late surge stalled shy of last week’s high at 1284.20. A breach of this level is needed to clear the way for renewed probes above $1300.

Continued dollar strength is helping to keep gold in check. The dollar index edged to a new 15-week high in overseas trading. Risk aversion associated with the Saudi corruption crackdown and President Trump’s trip to Asia are seen as underpinning the precious metals.

Silver gave back more than half of yesterday’s solid intraday gains overseas, but is back trading above $17 presently. The mid-October high at 17.41 is seen as key short-term resistance. Supports we’re watching at at 16.59 and 16.30.

Today’s economic calendar has JOLTs job openings for September, IBD/TIPP Economic Optimism Index and consumer credit. We’ll also hear FedSpeak from Janet Yellen and vice-chair Quarles.

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The Daily Market Report: Gold Pops More Than 1% on Heightened Risk Aversion


USAGOLD/Peter Grant/11-06-17

Gold is higher in U.S. trading, buoyed by heightened risk aversion associated with the Saudi corruption crackdown. With the President in Asia, and North Korea at the top of his agenda, that is a potential source of impending geopolitical headlines (or tweets) as well.

The yellow metal jumped more than 1% intraday. Meanwhile silver was up more than 2%, trading comfortably back above $17.

The broader implications of the Saudi crackdown are unknown at this point, but the uncertainty has also pushed oil prices to a two-year high. Rising energy prices are big contributor to inflation, for which gold is the classic hedge.

The Fed prefers to focus on core PCE, which excludes “volatile” food and energy prices. However, if energy prices continue to rise for an extended period, they eventually will exert upward pressure on core goods and services.

The dollar index extended to new 15-week highs in overseas trading, but backed off those highs on risk aversion related yen buying. USD-JPY had reached an 8-month high at 114.70 in overseas trading after BoJ governor Kuroda reaffirmed that there was still some distance to achieving the 2% inflation target. While easier BoJ policy is indeed expected to prevail for some time to come, gains above 114.00 could not be sustained.

Gold needs to reclaim $1300 to ease near-term pressure on the downside. Last week’s high at 1284.15 is seen as an important short-term barrier.

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The Daily Market Report: Gold Retreats Into the Range, as Markets Shrug-Off NFP Miss/Soft Wages


USAGOLD/Peter Grant/11-03-17

Gold is down intraday, having retreated back to the low-end of the recent range in the wake of today’s mixed U.S. economic data. The dollar index edged to new 15-week highs, helping to keep both gold and silver well contained.

Nonfarm payrolls rebounded in October, but missed expectations by a fairly wide margin. While September was revised higher, taking the negative print off the table, it was still a rather dismal couple months.

Average hourly earnings disappointed as well, coming in unchanged. The annualized pace of wage growth slowed to 2.4% y/y. That does not improve the prospects for higher inflation.

The market however has latched on to the downtick in the unemployment rate to a 17-year low of 4.1%, as evidence that things in the labor market are just great. A little scratching at the surface however paints a somewhat more ominous picture.

Nearly a million Americans dropped out of the labor force in October, pushing the labor force participation rate down to 62.7%. Rebounds in the participation rate in recent years have just failed to gain any traction.

In accepting President Trump’s nomination to be the next Fed Chair, Jerome Powell said he would do all he could to meet the Fed’s dual mandates of stable prices and maximum employment. Stable prices in Fed-world means 2% inflation. The central bank is clearly missing the mark on that front.

When Yellen, Powell and the rest of the FOMC looks at employment, I know they look beyond just the jobless rate. If they’re being honest, they’d have to acknowledge that it’s not all roses and sunshine on the labor front either.

That all suggests to me that the pause in the tightening cycle initiated in September, largely because of continued week inflation, just might not come to and end in December as many seem to believe. If nothing else, the surety that the market feels about a December rate hike is really overpriced. I was happy to read today that I have some good company.

Today’s pullback within the range provides an opportunity for gold investors to pick up some physical near 5-week lows. A rebound above $1300 is still needed to ease near-term pressure on the downside, with the high for this week — set yesterday at 1284.15 — marking an important intervening barrier.

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Morning Snapshot: Gold Edges Up Within Range Following NFP Miss

USAGOLD/Peter Grant/11-03-17

Gold is up slightly this morning, nonplussed by the NFP miss and still locked within the recent range. The dollar index remains narrowly confined as well near its 3-month highs, which is helping to limit the upside for the yellow metal. Silver is up as well, maintaining recent gains above $17.00.

U.S. nonfarm payrolls rose 261k in October, below expectations of +318k and whispers in the neighborhood of +400k. As I said in commentary yesterday, forecasters set a pretty high bar, creating the risk for disappointment. September NFP was revised higher from -33k to +18k, so at least the negative print is off the books. The unemployment rate ticked down to 4.065%.

So after a terrible number in September and a smaller than expected post-Hurricane rebound in October, how is it that the jobless rate ticked lower? Zerohedge explains:

…the number of people who exited the labor force soared by a near record 968,000 in October – the third highest on record – pushing the total number of people not in the labor force to a record 95.385 million, as the civilian labor force shrunk by whopping 765,000 in one month. — Zerohedge

Average hourly earnings came in unchanged for October, below expectations of +0.2%. The annualized rate of wage growth slowed to 2.4%.

Some are claiming this should be attributed to hurricane disruptions, but the chart presented by Bloomberg suggests that wage growth was meeting resistance ahead of 3% long before this hurricane season. This is something the Fed is likely to be watching very closely going into year-end, because if already tepid wage growth has stalled, it does not bode well for the inflation pressures that Fed keeps contending are just around the corner.

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The Daily Market Report: Gold Remains Range Bound, Awaiting Fed Chair Nominee and October Jobs Report


USAGOLD/Peter Grant/11-02-17

Gold is holding to the recent range, still awaiting the Fed chair nomination and tomorrow’s release of October jobs data. The dollar is consolidating as well, near 3-month highs after the Fed did nothing yesterday to temper December rate hike expectations.

The BoE did pull the trigger today on their first rate hike since 2007. UK CPI reached 3% in September, arguably cause to tighten, although Brexit related risks still abound. With the Fed on pause since the June hike, and inflation still below target, one has to wonder why the market still sees a December hike as a sure-thing.

The U.S. House tax proposal came in pretty much as expected:

A $1.51 trillion plan to cut taxes for corporations, reduce them for some middle-class families and tilt the United States closer, but not entirely, toward the kind of tax system long championed by businesses. — NYT

The plan is to get a piece of legislation through Congress and to the President by Christmas. If that happens, you can bet it won’t look anything like what was released today. Both Republican and Democrats, along with various special interests and lobbyists will seek to shape that final legislation to their liking in the weeks ahead.

The press is now widely reporting that centrist Fed Governor Jerome (Jay) Powell is a lock to get the nomination to replace Janet Yellen as Fed chair when her term expires in February. Powell is likely to seek to perpetuate the slow and steady normalization process initiated by Yellen.

Markets are anticipating a solid rebound in nonfarm payrolls in October. Median expectations are +318k, with the jobless rate holding steady at 4.2%. That’s a pretty high bar after September saw the first negative payrolls print since 2011. While there is indeed likely to be a post-hurricanes rebound, there is room for disappointment, especially when you consider how far off-base the forecasters were last month.

We may see heightened interest in gold investment if NFP is a miss tomorrow, as that would likely diminish December rate hike expectations. That would put the dollar under renewed pressure, boosting the yellow metal in the process.

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Morning Snapshot: Gold remains consolidative within recent range

USAGOLD/Peter Grant/11-02-17

Gold is maintaining a consolidative tone at the low end of the range that has dominated for the past several weeks. Markets are awaiting the release of the House tax plan as well as President Trump’s nomination of the next Fed chair.

The House plan is expected to be focused on a permanent cut to corporate taxes, from 35% to 20%. Additionally, the number of individual income tax brackets are to be cut and the estate tax will be repealed. However, the devil is in the details and those details are likely to have significant implications for the national debt.

Fed Governor Jerome (Jay) Powell is widely anticipated to be nominated to replace Janet Yellen as Fed chair. Powell is a centrist and is likely to perpetuate the current policy tact.

Yesterday’s Fed policy statement did nothing to curtail expectations of a December rate hike. Fed funds futures put the probability at 97%, even though inflation remains below target.

A lot of focus will also be placed on tomorrow’s release of October jobs data. The market is anticipating a sizable rebound in nonfarm payrolls of 318k, following September’s surprising negative print.

As for today’s U.S. data, it has been generally positive with a better than expected rise of 3.0% in Q3 productivity (prelim) and bigger than expected drop in initial jobless claims.

The BoE raised rates by 25 bps today. It was the first hike in a decade and they indicated that 2 more would be needed during the next two years to control prices. With UK inflation running above target, this one may have made some sense, but some are already expressing concern that the BoE is being “too upbeat.”

Sterling has firmed, which is helping to check the upside in the dollar. That in turn, may help to underpin gold investment.

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The Daily Market Report: Gold Firms Ahead of Fed Policy Statement, Silver Surges 2.5%


USAGOLD/Peter Grant/11-01-17

Gold heads into the Fed policy statement on a modestly more positive footing within the range. The yellow metal set a new high for the week in earlier trading before moderating slightly.

The policy statement comes out at 2:00ET. It is widely anticipated that the Fed will hold steady on policy. What remains to be seen is if they will reinforce expectations of a December hike, or seek to temper those expectations with more dovish guidance.

As always, the jobs report is also going to be seen as a potentially significant market mover. The market is looking for a solid rebound from the dismal September print of -33k jobs. Median expectations are +318k nonfarm payrolls.

That’s a pretty high bar to attain, following the first negative print in 7-yeaers. Today’s ADP survey results offered some encouragement, coming in better than expected at +235k private payrolls. However, September was negatively revised from +135k to +110k.

Silver is showing particularly good buoyancy, gaining more than 2.5% and reclaiming the 17-handle. This could be some short-covering in the paper market ahead of the Fed decision, but it’s also worth noting the improving demand picture for physical silver. The U.S. Mint reported that silver eagle sales rebounded to 1,040,000 in October, up 225% from the 320,000 sold in September. Industrial demand is reported to be improving as well.

It is believed that gold and silver will benefit from the passage of tax reform, the details of which are expected to be revealed by the House tomorrow.

The tax plan being considered in Congress would inflate the nation’s budget deficit and expand the debt, Bart Melek, head of global commodity strategy at TD Securities in Toronto, said at the Silver Industrial Conference in Washington. That deterioration in the nation’s fiscal standing is a recipe for higher silver and gold prices, he said. — Bloomberg

Gold is arguably extremely undervalued relative to stocks and other risk assets, but silver is very undervalued relative to gold. We may be seeing early signs of positioning ahead of the tax plan and that deterioration of the nation’s fiscal position.

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Morning Snapshot: Gold firms within range

USAGOLD/Peter Grant/11-01-17

Gold is higher within the range, but remains limited by a firm dollar and stocks. The market is awaiting the Fed’s policy decision later today.

The Fed is expected to hold steady, keeping the December rate hike on the table. However, it might be worthwhile to temper tightening expectations going into year-end, just to give themselves some leeway in the event that inflation fails to pick up.

The ADP jobs survey came in stronger than expected, perhaps creating some upside risk for Friday’s nonfarm payrolls report. Expectations are presently +318k, with the unemployment rate holding steady at 4.2%.

Later this morning we’ll see manufacturing PMI and ISM, construction spending, EIA crude stocks and domestic car and truck sales.

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The Daily Market Report: Gold Weakens Within Range as Dollar Recovers


USAGOLD/Peter Grant/10-31-17

Gold has turned defensive in the range once again, weighed by a rebound in the dollar. Upbeat U.S. data also buoyed risk appetite and stocks today.

U.S. home prices and consumer confidence continue to rise. The employment cost index jumped as well, which inspires hope that wage growth and then inflation might accelerate. However, as we saw yesterday, the Fed’s preferred measure of inflation remained sluggish in September.

Will that be worth mentioning when the Fed announces policy tomorrow? And if they do, will it temper December rate hike expectations?

The ECB came out with more dovish than expected guidance last week, as did the Bank of Canada. The latter likely had an inkling that the economy had contract in August, as the rest of us found out today.

The Canadian dollar came under pressure as hopes for tighter monetary policy evaporated. The yen also dropped today after the BoJ held steady with no mention of any plans for normalization.

As I mentioned in the Morning Snapshot, it might be in the best interest of the Fed to adopt a more dovish tone tomorrow, to better align with the current policy direction of the other major central banks. No change in policy is expected at this meeting and they will likely leave the door open for a December hike, but a tempering of the high expectations of that hike might be warranted.

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Morning Snapshot: Gold retreats back into range as dollar firms on weaker yen

USAGOLD/Peter Grant/10-31-17

The consolidative tone in gold persists as the dollar remains firm and stocks rebound. The yellow metal still needs to climb back above $1300 to ease short-term pressure on the downside.

The BoJ left the policy rate unchanged at -0.1%, kept 10-year JGB rates capped “around zero” and will maintain the QE pace of ¥80 trillion per year. Despite optimism about both growth and inflation, guidance remains dovish. That pressured the yen, buoying the dollar in the process.

The Fed begins their two-day FOMC meeting today. When policy is announced tomorrow, no change is expected. While a December rate hike will remain on the table, it might behoove the central bank to start tempering those expectations; unless they truly believe inflation is on the verge of rebounding.

Expressed concern about the ongoing absence of inflation — which is the reason they paused in September — would likely halt the recent rise in the dollar. With the ECB, BoC and BoJ maintaining their dovish guidance, it might be in the best interest of the Fed to hint that the pause might be perpetuated into 2018.

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The Daily Market Report: Gold Firms Intraday as Busy Week Gets Underway


USAGOLD/Peter Grant/10-30-17

Gold has firmed modestly intraday, but remains well contained within the recent range. A number of important events and data releases are slated for this week, which seems to have tempered risk appetite somewhat.

We’ll get policy announcements from the BoJ, Fed and BoE this week on 31-Oct, 01-Nov and 02-Nov respectively. The BoJ is likely to hold steady on the heels of Abe’s resounding elections victory. The Fed is expected to hold steady. The BoE may hike by 25 bps to at least reverse out the post-Brexit emergency rate cut.

The Fed policy statement will be closely watched for any indication about ongoing concerns about the absence of inflation. Today’s PCE data for September showed that inflation remains below target, which is the precise reason they did not tighten in September.

With a December rate hike fully priced in, arguably the risk is toward a more dovish statement. Will there be verbiage in the statement to rattle the conviction of the hawks? There is no press conference scheduled for this FOMC.

The White House has confirmed that President Trump will be making his nomination for Fed chair this week, reportedly on Thursday. Odds have seemingly shifted in favor of centrist Fed Governor Jerome (Jay) Powell.

The House is also expected to release the details of its tax cut legislation this week. Will those details be sufficient to keep the stock market bubble inflating, or will this be a classic case of ‘buy the rumor, sell the fact?’ And perhaps most importantly, what will be the implications for the national debt, bearing in mind that the debt ceiling comes back into play on December 4.

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Morning Snapshot: Gold remains range bound to begin busy week

USAGOLD/Peter Grant/10-30-17

Gold starts the week as it ended, consolidative within the recent range. The dollar is a little easier, as are stocks, with risk appetite tempered somewhat ahead of this rather busy week.

The first indictments in the Russian collusion investigation are occurring today. Former Trump campaign chairman Paul Manafort and his aide Rick Gates are supposed to turn themselves in to the FBI today.

The Fed’s two-day FOMC meeting commences tomorrow. No change to policy is anticipated, but markets will be looking for further clarification of the central bank’s intentions for December. The BoJ and BoE meet this week as well.

Today’s U.S. data are a mixed bag. Personal income and consumption jumped in September. However, core PCE inflation was up a scant 0.1%. The Fed still has an inflation problem, which was the primary reason they paused the tightening cycle in September.

Politico is reporting that President Trump will make his nomination for the next Fed chair on Thursday. They reported last week that the field had narrowed to John Taylor and Jerome Powell.

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The Daily Market Report: Gold Range-Bound Ahead of Weekend


USAGOLD/Peter Grant/10-27-17

Gold appears poised to end the week on a consolidative note, well within the range that has dominated so far in October. That range is defined by the 1260.10 low from 06-Oct and the 1306.04 high that was set 10-days later.

Dollar gains and risk appetite continue to limit the upside for gold. Additional optimism about the U.S. economy was garnered from today’s better than expected 3.0% advance GDP print. That lends an additional measure of confidence to expectations that the Fed will indeed raise rates again in December.

The Catalan parliament votes to declare independence from Spain today. Spanish PM Rajoy quickly moved to invoke Article 155, dissolving the Catalan parliament, moving to fire Carles Puigdemont and his cabinet and calling for a regional election.

Tensions are high and there are risks for unrest over the weekend. Headlines following the initial independence referendum several weeks ago suggested Spain was on the verge of a civil war. That is probably even more true today.

Will Spain send in the national police and army troops to enforce direct rule? How will the people of Catalonia react?

Now that the budget has passed both the House and Senate, the GOP is obliged to release the specifics of their tax proposal. That should come next week and that will allow analysts to calculate the debt implications and I suspect they will be significant.

With the national debt and household debt at record levels, it’s reasonable to wonder just how much more debt this economy can tolerate. That in turn begs the question, why would the Fed raise rates into this situation; especially when inflation remains so subdued.

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Morning Snapshot: Gold remains defensive at low end of recent range

USAGOLD/Peter Grant/10-27-17

Gold remains defensive at the low end of the recent range, weighed by heightened risk appetite and a stronger dollar. Support in the yellow metal is well defined by the 1260.10 (06-Oct low).

U.S. advance Q3 GDP came in better than expected at 3.0%, essentially unchanged from +3.1% in Q2. This will help justify persistently elevated expectations for a December rate hike, even though the absence of inflation continues and that’s the “mystery” that prompted the Fed to pause in September.

The BoJ faces the same problem with October CPI coming in at +0.7% y/y. Don’t expected any move toward tighter policy anytime soon.

The dollar is rallying based on anticipated widening of interest rate differentials. Most of the world continues to lean toward easier policy, while the U.S. is in the midst of a tightening cycle (Sep pause notwithstanding). These dollar gains are keeping a lid on gold for now.

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The Daily Market Report: Gold Falls Within Range as Dovish ECB Lifts Dollar


USAGOLD/Peter Grant/10-26-17

Gold has turned more defensive within the range, dropping to fresh 3-week lows. The yellow metal is being pressured by strength in the dollar after a dovish ECB pushed the euro lower.

The ECB held steady on policy as was widely expected. While QE was extended by 9-months, the monthly purchases were halved to €30 bln.

Mario Draghi maintained a dovish bias during his presser, stressing that an “ample degree of monetary stimulus remains necessary.” He also said that QE remains “open-ended” and could be extended. There is some speculation that cutting the size of the monthly purchases was a necessary reaction to an absence of supply.

News that the U.S. $4 trillion 2018 budget narrowly passed the House, is further stoking risk appetite. This is seen as another significant hurdle toward advancing tax cuts.

Politico cited an unnamed source, said to be close to the President, as saying that the field of potential replacements for Janet Yellen has been narrowed to Jerome Powell and John Taylor. The former being a centrist, the latter thought to be a hawk.

While this may be modestly moving the policy expectations needle toward hawkish, the White House has said that no final decision has been made. The President is likely to make the nomination before he leaves for Asia on November 3.

Another unnamed senior source that Politico described as very close to the process said it was not safe to assume Trump will nominate Powell or Taylor for the top spot at the central bank, saying he “changes his mind about it every day.” — Reuters

On the support side of the equation are geopolitical tensions regarding Catalonia and North Korea. And political tensions associated with various ongoing investigations and the recent discord among GOP Senators.

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The Morning Snapshot: Gold remains consolidative below $1300

USAGOLD/Peter Grant/10-26-17

Gold continues to consolidate below $1300 after ECB policy came in as expected: Steady on rates and smaller QE for longer. Mario Draghi’s press conference is ongoing.

U.S. initial jobless claims rebounded 10k last week, but the print was still below expectations. The trade gap widened in-line with expectations.

There are reports circulating this morning, citing Politico, that Janet Yellen and Kevin Warsh are out of the running for Fed chair. That may mean that the field has narrowed to John Taylor and Jerome Powell.

The dollar index is probing back above 94.00, buoyed by a dovish ECB and the resulting weaker euro. That is keeping gold defensive. Political and geopolitical tensions continue to provide support.

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The Daily Market Report: Gold Consolidates, Awaiting Clarity on Several Fronts


USAGOLD/Peter Grant/10-25-17

Gold continues to consolidate in the recent range as the market seeks some clarity on Fed succession and ECB policy. The former is reportedly unlikely to happen this week, while the ECB will announce policy tomorrow.

The short list for the next Fed chair includes John Taylor, Jerome Powell and a reappointment of Janet Yellen. If these are really the only three in contention, then Janet Yellen is President Trump’s best bet for furthering his reflation agenda. Whether she would stay on or not is an open question. I wrote in great detail on this topic in yesterday’s DMR.

Tomorrow the ECB is expected to hold steady on policy, as the BoC did today. As for the QE question, there seems to be an expectation that the ECB will signal that it will buy fewer assets for a longer time. Sort of a taper, but not really, as Draghi may be hoping for signs that better growth prospects are taking hold before he really moves the central bank toward tighter policy.

Just a week after the Senate passed a budget proposal — a key step in advancing proposed tax cuts — the President’s support in the Senate has been rattled. Arizona Sentaror Jeff Flake said today that “a lot more” Republicans are poised to speak-out against Mr. Trump.

If the President is losing the support of the GOP, yet another key piece of his agenda may be in jeopardy. I would also point out that tax reform has been a primary driving force behind the stock market rally. If the tax cuts are not passed before year-end, there is some risk that equities could rollover.

Capital coming out of shares would find its way to safe-haven assets, including gold. If the yellow metal pushes back above 1308.80 in the near term, a resumption of the uptrend that has dominated this year would become likely.

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Morning Snapshot: Gold steadies as dollar gains stall

USAGOLD/Peter Grant/10-25-17

Gold is maintaining a generally consolidative tone within the recent range, as gains in the dollar index stalled ahead of head of important resistance at 94.00/14. The yellow metal needs to reclaim $1300 to ease short term pressure on the downside and return confidence to the dominant uptrend.

A better than expected Q3 GDP print for the UK sparked a rebound in Sterling, amid reinvigorated hopes that the BoE will raise rates next week, for the first time in more than a decade. This has weighed on the dollar.

U.S. data today were generally positive with durable goods orders, new home sales and home prices all beating expectations. The Bank of Canada will announce policy today (steady expected) and the ECB is up tomorrow.

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The Daily Market Report: Gold Pulls-Back Within Range as Dollar and Stocks Rally


USAGOLD/Peter Grant/10-24-17

Gold pulled back within the range, weighed by risk appetite and a firm dollar. On the other side of the coin, are political and geopolitical risks offering support. These opposing forces have kept the yellow metal fairly well contained of late.

While the underlying trend remains positive, a definite push back above $1300 is needed to return focus to the high for the year at 1357.50. That high was established back in early-September.

President Trump’s impending choice for Fed chair is also weighing somewhat on gold, with a couple of policy hawks in contention. While the Fed chair does not set policy alone, a vocal hawk at the head of the table, would give the impression that rates are more likely than not to head higher.

My contention is that if “reflation” is the goal of the President, why hamstring yourself by appointing a hawk? It would seem that Janet Yellen might be the ideal choice. She is both a dove and a know commodity to the markets. However, there are considerable doubts as to whether the President will reappoint her, and whether she’d accept if asked to serve again.

At the other extreme is economist John Taylor, whose Taylor Rule suggests that the Fed funds rate should be closer to 4% than 1%. It would be difficult to convince the current FOMC to move away from the slow/steady tightening regime instituted by Yellen, but he would also be under constant external pressure to institute the rule that bears his name.

And it’s worth remembering that the Fed opted to hold steady on rates in September. The pause was largely inspired by the Fed’s inability to generate 2% inflation. While there have been some indications of hotter inflation more recently, it is largely thought to be associated with higher energy prices in the wake of the recent hurricanes. The situation with regard to inflation probably really hasn’t changed much since September, so why is the market fully pricing in a December rate hike?

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