Gold charged to a new 3-week high amid resurgent geopolitical concerns. This seems to be overriding this morning’s better than expected U.S. economic data.
President Trump acknowledged to Japanese PM Abe that North Korea is a “big problem” and pledged that that problem will be “solved.” The markets seem to have interpreted that as a threat.
“It is very much on our minds… It’s a big problem, it’s a world problem and it will be solved. At some point it will be solved. You can bet on that.” — President Donald Trump
The first revision to Q1 GDP came in better than expected at +1.2%. Durable goods orders for April also beat expectations, falling 0.7% on expectations of -1.1%. March saw a significant upward revision to +2.3%, versus +0.7% previously.
This certainly keeps the June rate hike on the table. Minutes of the last FOMC meeting revealed that the Fed waffled a little in May. Today’s should renew confidence that there’s another 25 bps hike coming in several weeks.
The dollar firmed accordingly, but gold is maintaining its gains. Given the political and geopolitical uncertainty, traders may be reluctant to carry short gold positions into the long holiday weekend.
Gold continues to consolidate within the recent range, underpinned by political, geopolitical and growth risks, as well as a generally weak dollar. Capping the upside is persistently buoyant stocks and the belief that the Fed will still raise rates in June, despite the aforementioned risks.
Those rate hike expectations remain elevated above 80%, despite the FOMC minutes revealing that the Fed turned much more ambiguous at the May meeting. The Fed expressed concerns about weak growth, slowing inflation, elevated asset valuations and geopolitical tensions. While largely dismissed as transitory, they stressed the data dependency of further tightening.
Initial jobless claims edged higher to 234k last week, below expectations. The trade deficit expanded to -$67.5 bln in April. The Bloomberg Consumer Comfort Index and M2 are out later and we’ll hear FedSpeak from Brainard and Bullard.
Gold is edging higher within the recent range amid mixed fundamental inputs. While the underlying trend for the year remains favorable, a break of last week’s high at 1265.01 is needed to return focus to the high for the year at 1295.03.
The U.S. calendar features existing home sales and the minutes from the May FOMC meeting. We’ll also hear FedSpeak from Brainard, Bullard, Kaplan and Kashkari.
The Bank of Canada will announce policy today at 10:00ET. They are widely expected to hold the overnight rate steady at 0.5% based on ongoing concerns about “material excess capacity.”
Moody’s downgraded China from A1 from Aa3, citing concerns over growing debt and slowing growth. It was China’s first downgrade in 30-years.
“Looking ahead, we expect China’s growth potential to decline to close to 5% over the next five years,” said Moody’s. If that really happens, there will be considerable implications for the broader global economy.
Gold dipped modestly in the wake of the Manchester terror attack as Sterling fell, pushing the dollar lower. However, market moves in the immediate wake of the attack have largely been reversed. Sterling is now slightly higher on the day, the dollar is back on the defensive and gold is back within striking distance of yesterday’s highs at 1263.76.
The negative dollar and positive gold trends remain intact. Fresh highs this week would shift the technical focus to the high for the year at 1295.03.
Geopolitical tensions rose after the Indian army fired artillery on Pakistani military posts across the “line of control.” The Times of India described it as a “punitive” artillery assault in retaliation for the Pakistan military aiding infiltrators to the Indian side.
The U.S. calendar has April home sales, Markit flash PMIs and the Richmond Fed index. We’ll hear FedSpeak from Kashkari and Harker, as well as ECBSpeak from Coeure.
Gold is edging higher, buoyed by new 6-month lows in the dollar index. Silver has regained the 17 handle, rising more than 1% to set new 2-week highs.
The euro jumped in overseas trading after Angela Merkel said the German trade surplus was so high because the “the euro is too weak.” She laid this at the feet of the ECB, which may lend some gravity to speculation about initial moves toward policy normalization later in the year.
The Chicago Fed National Activity Index rose to 0.49 in April, versus a negative revised 0.07 in March. That’s about it today, besides a full raft of FedSpeak from Harker, Kashkari, Brainard and Evans.
Gold is trading modestly higher after failing to sustain overseas losses. The yellow metal initially dipped to 1245.10 as the dollar staged a rebound, but the gains in the greenback could not be sustained.
Today’s U.S. calendar is empty, so focus will remain squarely on U.S. political turmoil, which is threatening to derail President Trump’s reflation agenda. In the absence of promised fiscal stimulus, the U.S. economy will likely remain confined to tepid growth and perhaps sets the stage for recession.
This will raise doubts at the Fed, as to their next policy move. Continued rate hikes into weak growth certainly heightens the likelihood of recession. How close to the tipping point is the Fed willing to go?
Geopolitical tensions are heightened today as well after U.S. warplanes attacked a pro-Assad military convoy. Both Syria and Russia have condemned the attack. Reports suggest that there may have been Iranian embedded with the Syrians as well.
Gold remains generally well bid in the wake of yesterday’s solid gains. The yellow metal remains underpinned by haven demand amid ongoing U.S. political turmoil.
Stocks extended to the downside in pre-market trading, adding to Wednesday’s considerable losses as risk appetite continues to wane. As BusinessInsider’s Pedro da Costa put it, “the challenge to Trump’s political power has reached a level that means his economic agenda is off the rails.” That would suggest that the balance of the post-election stock market gains are vulnerable to retracement.
This morning’s U.S. data were generally constructive. Initial jobless claims for last week dropped 4k to 232k, below expectations of 240k. The Philly Fed index rose to 38.8 in May, beating expectations of 19.5 by a wide margin. Later this morning we’ll see leading indicators for April. A rise of 0.3% is expected.
Gold continues to rise amid swirling U.S. political controversies that are once again threatening to derail President Trump’s fiscal agenda. The dollar has now erased nearly all of its post-election gains, falling to new 6-month lows.
“Risk-off” is the order of the day, which is weighing on stocks. Safe-haven demand is lifting gold, Treasuries and the yen. Treasuries are getting an additional boost as the political risks to the reflation trade weigh on Fed rate hike expectations. Fed funds futures now put the odds of a June hike at 69%.
Half of gold’s decline from the mid-April high at 1295.03 to the early-May low at 1213.60 has been retraced. These gains also put the yellow metal definitely back above the 200-day moving average. The next retracement level to watch is 1263.92 (61.8%). Above that, the high for the year would be back in play.
Gold is modestly higher, buoyed by a weaker dollar. The dollar index has fallen to new 6-month lows, mostly on the back of euro strength, but commodity currencies have also gained against the greenback recently.
The dollar has now retraced most of its post-election gains, weighed by uneven economic data, dimmed expectations of further Fed rate hikes and a growing realization that implementing the President’s reflation agenda is not going to be easy. Nonetheless, Mr. Trump has not been shy about saying he prefers a weaker dollar as a means of stoking demand for U.S. exports. Therefore the President may be pleased to see the dollar retreat, but is likely nonplussed about the reasons.
U.S. data this morning were mixed: Housing starts missed expectations, dropping 2.6% in April. Industrial production rose 1.0% in April, above expectations of +0.4%.
Meanwhile the euro is at 6-month highs, buoyed by optimism in the wake of the centrist victory in the French election and growing belief that the ECB is going to start removing accommodations at some point this year. While Q1 GDP was confirmed at +0.5%, the annualized rate of growth eased to 1.7%.
European market seem to be taking heart from German ZEW investor confidence index. While the headline number slightly missed expectations, the overall Eurozone expectations reading jumped to 35.1 from 26.3.
Gold is higher to start the week above revived geopolitical risks and continued unevenness in U.S. data. Silver is up nearly 2% at 16.74.
North Korea has reportedly tested a mid- to long-range missile with the capability to carry a “large-size heavy nuclear warhead,” in defiance of both the U.S. and UN. “The test-firing of ICBMs will occur at any time and place, at the will of North Korea’s highest leadership,” vowed North Korea’s ambassador to China. Now we all wait to see if President Trump decides to respond.
New York’s Empire State Index tumbled to -1 in May, well below market expectations of 6.3, versus 5.2 in April. Later this morning we’ll see the NAHB Housing Market Index for May as well as March TIC data.
Gold started the session modestly higher and got a bit of a boost after soft U.S. data weighed on rate hike expectations and the dollar. Tuesday’s high at 1228.59 has been negated, shifting focus to the high for the week at 1236.51.
U.S. CPI cooled to +2.2% y/y in April, versus 2.4% y/y in March. Core CPI dipped to +1.9% y/y, from 2.0% in March.
U.S. retail sales rose 0.4% in April, below expectations of +0.6%. Ex-autos came in at +0.3%, versus expectations of +0.4%.
Expectations of a 25 bps rate hike at the June FOMC meeting have edged back below 80%. In light of today’s data, further limited tempering is likely.
The continued unevenness of U.S. economic data, the current political uncertainty, along with heightened geopolitical risks should continue to offer support to gold. If any of these situations deteriorate further, safe haven demand is likely to pick-up.
Gold continues to consolidate within Tuesday’s range, just above the lows of the recent move. A firmer dollar is helping to keep the yellow metal contained on the upside, while geopolitical risks are seen as limiting the downside.
A bigger than expected rise in producer prices to 2.5% y/y in April edged the needle toward stagflation in light of the anemic 0.7% growth in Q1. April CPI comes out tomorrow and arguably there is some upside risk to the +0.2% expectations.
Markets now need to figure out if the Fed is more likely to adjust policy in response to hotter inflation, or the weak growth. Inflation is of course the hearts desire of central banks in countries that carry massive deficits.
However, if growth collapses, so typically do prices. So monetary policy becomes a delicate balancing act. In playing that game, sometimes stagflation results.
What’s important to remember is that no matter the ‘ation’ we get — inflation, deflation or stagflation — gold tends to perform well in all these environments. The recent dip in prices may be viewed as an excellent buying opportunity.
Gold is consolidating within yesterday’s range, but the tone remains defensive. Heightened risk appetite and a firmer dollar — near 3-week highs — continues to weigh on the yellow metal.
U.S. import prices beat expectations, export prices rose in line with expectations, tempering recent concerns over disinflation somewhat. April PPI and CPI are out later in the week and modest gains of 0.2% are anticipated for both. A rebound in inflationary pressures would likely halt the recent decline in the metals.
EIA data are out later this morning and we’ll hear FedSpeak from Kashkari and Rosengren. April retail sales is out on Friday and is probably the most important data point for the week. Median expectations call for a solid gain of 0.6%.
Gold has edged to a new 7-week low, weighed by a firmer dollar and diminished risk aversion. With the French election behind us and without any appreciable change in the geopolitical tensions between the U.S. and North Korea, risk appetite has resurfaced.
Make no mistake, the geopolitical saber rattling continues. North Korea is likely planning another nuclear test, amid speculation that newly discovered man-made islands near the Snohae Satellite Launching Station are being developed as a missile launch site. It remains unclear how the U.S. and China will react should the DPRK conduct another nuclear test, but there would almost assuredly be some reaction.
U.S. wholesale sales for March is out later this morning. A rise of 0.2% is anticipated. We also have FedSpeak from doves Kashkari and Rosengren, as well as hawk Kaplan.
Gold is slightly higher, having stabilized after yesterday’s French election turned out in line with expectations. With Macron’s victory, Frexit is off the table, much to the relief of the eurocrats in Brussels.
The new President now faces the challenge of forming a government that will allow him to implement his agenda. French parliamentary elections are June 11 and June 18. The present Socialist majority of outgoing President Francios Hollande is widely expected to be ousted; but whom takes takes their place? Macron’s newly-renamed La Republique En Marche has exactly zero members of paliament.
In defeat, Marine Le Pen has already claimed the mantel of opposition leader. That makes next month’s elections pretty important. Then of course there are the upcoming Italian elections, so the relief in Brussels is likely to be short-lived.
Today’s U.S. economic calendar is very light. There is FedSpeak from St. Louis Fed President Bullard today. Focus is on retail sales and CPI later in the week.
Gold started the session modestly higher, dipped briefly into negative territory on the better than expected April jobs report before recovering into the range. Silver remains defensive, having been unable to sustain overseas gains.
Nonfarm payrolls for April came in better than expected at +211k, while the dismal number for March was revised even lower to +79k. The jobless rate ticked lower to 4.4%.
In the wake of these data, June rate hike expectations are likely to remain elevated. With a great deal of FedSpeak slated for today, there will be ample opportunity to put a hawkish spin on the data if they are so inclined. Fischer, Williams, Rosengren and Yellen all speak today.
Focus now shifts to the French run-off election this weekend. On the off-chance that Marine Le Pen pulls off an upset, the market reaction could be extremely volatile on the swing to risk-off.
Polls suggest Macron’s advantage is 20%, but there is some concern that those who voted for one of the other candidates in the first round won’t turn out. I still think this election is going to be closer than many are anticipating.
Gold fell to a 6-week low, amid heightened expectations that the Fed will shrug off weak Q1 growth and fading inflation expectations and hike rates again in June. Fed funds futures now put the probability of a 25 bps hike on June 14 at 78%.
Adding additional weight to gold this morning is a World Gold Council report that shows Chinese official gold buying stalled in recent months. “China’s gold (reserves) remains comfortably above 2 percent, reaching as much as 2.4 percent as the gold price rose during Q1… This is its highest share since the early 2000s, and may partly explain the lack of gold purchases in recent months,” according to the WGC.
U.S. productivity slumped to 0.6% in Q1 (prelim), vs +1.8% in Q4. Low productivity has been an ongoing drag on growth, as evidenced by the weak Q1 GDP print. At the same time, Unit Labor Costs jumped 3%. Higher labor costs and less productivity poses a real problem.
The U.S. trade deficit narrowed to -$43.7 bln in March, versus expectations -$44.7 bln and -$43.8 bln in February. The weaker dollar may have helped the cause here.
The dollar is under pressure today, flying somewhat in the face of rate hike expectations. This is being driven largely by rising expectations that Macron is going to soundly defeat Le Pen in this weekend’s French election.
Focus now shifts to tomorrow’s nonfarm payrolls report for April.
Gold is edged to a new 3-week low ahead of today’s Fed policy statement. That announcement comes at 2:00ET and while no change in actual policy is anticipated, the market will be looking for clues as to the Fed’s intentions for the next meeting in June.
Silver has extended to the downside, convincingly negating support at 16.80. That puts silver at a 14-week low and the gold/silver ratio has probed above 75; nearly a 1-year high. These losses seem to be a result of the unwinding of the reflation trade as the Trump agenda seemingly has stalled.
The ADP employment survey for April came in at +177k, below expectations of +185k, versus a negative revised +255k in March (was +263k). April nonfarm payrolls is out on Friday, with median expectations running at +188k. The unemployment rate is expected to tick up to 4.6%.
Markit services PMI and services ISM are out later this morning. EIA data for last week are out as well, which may add to oil’s woes.
Gold remains defensive with the two-day FOMC meeting beginning. The yellow metal has extended modestly lower in early New York trading and silver is keeping pressure on the important 16.80 support level.
When policy is announced tomorrow, there is not expected to be any change. The guidance will be closely scrutinized in an effort to determine the likelihood of another rate hike in June, in light of the weak first-quarter growth and diminished inflation pressures. Fed funds futures continue to suggest the probability of such a hike at 67%.
There is some expectation that the Fed will reveal additional details on balance sheet normalization. There has been FedSpeak in recent weeks suggesting that process could begin later this year.
The Greek government has reportedly agreed to a new deal to unlock additional bailout funds. More austerity and higher taxes in exchange for moneys now to prevent default. This is a saga going back to 2009 and seemingly has no end.
The U.S. calendar is very light today, with just April domestic auto sales.
Gold continues to consolidate at the low end of the recent range amid offsetting fundamentals. This morning’s weaker than expected personal income and PCE data has the metals edging higher in early New York trading.
Personal income rose 0.2% in March, below expectations of +0.3%. February was revised lower from +0.4% to +0.3%. PCE was unchanged in March, versus expectations of +0.2%. The PCE chain price index — the Fed’s preferred inflation measure — fell 0.2%.
While weak Q1 growth didn’t really budge June rate hike expectations, the return of disinflationary pressures may. The FOMC meets Tuesday and Wednesday this week. They are not expected to change policy at this meeting, but the messaging on June could prove interesting.
Gold continues to consolidate around the 1265.00 level, weighed by the present risk-on environment, but buoyed by a softer dollar, geopolitical risks and some uncertainty about how much of the Trump agenda might actually get implemented. With the French political risks likely unwound, the yellow metal might be staging for a rebound.
The ECB held steady on both interest rates and the QE schedule today, as was widely expected. However, the door remains open for further accommodation: “[I]f the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration.”
There has been speculation this week that a more hawkish tone might be communicated in June, once France has a new President. “We don’t do monetary policy on the likely outcome of elections,” claimed Draghi.
Initial jobless claims rose 14k last week to 257k, above expectations of 241k. Durable goods orders disappointed, rising 0.7% in March, on expectations of +1.2%. The advance trade deficit held steady at -$64.8 bln in Mar, near expectations of -$65 bln.
Gold is consolidating at the low end of this week’s range as French election relief and the proposed U.S. corporate tax cut continues to foster a risk-on environment. Geopolitical risks and a weaker dollar are seen as limiting the downside.
Treasury Secretary Mnuchin, speaking in CNBC this morning, confirmed that the Trump administration would seek a 15% corporate tax rate. Mnuchin claimed the plan would be “the biggest tax cut and the largest tax reform in the history of our country.”
Now we just need to see the details, realizing that a tax cut of this magnitude is also going to take a serious bite out of revenue. Each percentage-point cut is said to equate with $120 bln in tax revenue. You start talking about a 20 bps tax cut and you’re talking about real money.
Today’s U.S. economic calendar is quiet with EIA data and 2-year and 5-year Treasury auctions. Tomorrow the ECB will announce policy.
Gold remains defensive as markets reverse out the French election risks, and look ahead to the May 7 run-off, where centrist candidate Emmanuel Macron is expected to handily beat Marine Le Pen. Investors will be watching the polls closely in the weeks ahead to see if Le Pen can narrow the differential.
Weakness in the dollar that is associated with the rebound in the euro will help to limit the downside in gold. Elevated geopolitical tensions provide an underpinning to the yellow metal as well.
North Korea staged a massive artillery drill today to celebrate the anniversary of their army’s founding. So far, no ballistic missiles or nukes have been tested. Meanwhile the nuclear submarine USS Michigan arrived in the area.
U.S. consumer confidence, new home sales, Case-Shiller home prices and the Richmond Fed index are out later this morning. Thursday the ECB will announce policy. They are expected to hold steady.
Gold retreated below the 1270 level as global risk appetite surged in the wake of the French election results. As anticipated, Emmanuel Macron and Marine Le Pen will advance will advance to the run-off election on May 7, with the former favored to win.
This is the first time in more than sixty-years that the two main political parties in France do not have a candidate in the run-off, reflecting the ongoing dissatisfaction with the political status quo. To the relief of many, at least one of the finalist is a euro-friendly centrist that started his own party to get into the race.
The revived risk appetite has caused the euro and equities to surge. The dollar index fell to pressure the 98.86 low from late March, which has limited the downside in the yellow metal somewhat. Persistent geopolitical tensions continue to help underpin gold as well.
Gold is maintaining a consolidative tone as the week comes to an end. Geopolitical concerns continue to offer support, as does uncertainty surrounding the French election on Sunday.
French election polls have narrowed considerably in recent weeks, turning it into a close four-way race. With anti-euro candidates on both sides of the political spectrum that have pledged Frexit referendums, nobody seems to be considering what happens if those candidates — Le Pen and Melenchon — advance to the May run-off election. That would certainly shake things up on the Continent, and give the eurocrats in Brussels a case of the vapors!
Flash Markit PMIs for both manufacturing and services are out later this morning, along with existing home sales for March.
Gold is consolidating around the 1280 level, just off the 5½-month highs set earlier in the week at 1292.30/1295.46. A weaker dollar, as well as persistent geopolitical tensions are seen as supportive.
Initial jobless claims rebounded last week and the Philly Fed index missed expectations significantly. Leading indicators for March is out later this morning. Median expectations are +0.2%.
Fed Governor Powell is speaking on regulatory issues in Washington, DC this morning. He did mention in his opening remarks that while the economy has recovered from the financial crisis, he is concerned about weak growth.
Gold is modestly corrective after Monday’s high at 1295.46 successfully capped gains yesterday. However, geopolitical tensions, growth risks, ebbing rate hike expectations and a weaker dollar all conspire to underpin the yellow metal. Gold is already off the intraday lows, as dips continue to be seen as buying opportunities.
The calendar is pretty light today with just the Fed’s Beige Book and EIA crude data. We’ll also hear Fedspeak from Boston Fed hawk Rosengren.
Gold continues to consolidate the recent push to 5-month highs. Similarly, silver is consolidating after hitting a 5-month high of 18.64 in overseas trading yesterday.
The dollar remains defensive in the wake of President Trump comments last week and speculation that “strong dollar policy” is dead. Reuters reports that
Goldman Sachs abandoned the two strong dollar plays in its 2017 trading recommendations on Tuesday, pointing to the Trump administration’s concerns over the strength of the currency and improvement in growth in rival economies. — Reuters
A sharp decline in housing starts in March is also helping to underpin the metals. Industrial production comes out later this morning. Median expectations are +0.4%. We’ll also hear FedSpeak from Ester George.
Gold extended to the upside in overseas trading to hit yet another 5-month high at 1295.46, before retreating back to near unchanged on the day. Most European markets are closed today for Easter Monday, so trading conditions remain thin.
Geopolitical tensions remain elevated, offering a solid underpinning to the gold market. Vice President Pence showed up in South Korea near the DMZ over the weekend to warn that the era of “strategic patience” with North Korea is over.
Rumblings of a possible preemptive strike against North Korea continue. Meanwhile, the Russians, Syrians and Iranians have all warned the U.S. against further strikes in Syria.
Additionally, the U.S. economy continues to sputter, offering additional support for gold. We saw further downward revisions to Q1 growth forecasts in the wake of Friday’s drop in retail sales and CPI. This morning, the NY Empire State Index plunged to 5.2 in April, well below expectations of 15.0, vs 16.4 in March. Nearly all of the post-election gains have new been erased.
Most markets are closed today in observance of Good Friday, so gold is not trading. However, there were some significant U.S. data releases that would have likely pushed the yellow metal higher.
U.S. retail sales fell 0.2% in March, below expectations of unchanged, versus a negative revised -0.3% in February (was +0.1%). Retail sales ex-auto were unchanged, on expectations of +0.2%. That makes two consecutive monthly declines, despite robust consumer sentiment. So, consumers are apparently very optimistic . . . but not enough to actually buy anything . . .
U.S. CPI fell 0.3% in March, below expectations of unchanged. Annualized consumer inflation slowed to 2.4% from 2.7% in February.
Core CPI was -0.1%, on expectations of +0.2%. That’s the first decline in core inflation since January 2010. The annualized pace of core consumer inflation slowed to 2.0% from 2.2% in February.
Now, one month of data do not necessarily mean the reflation trade has come to an abrupt end, but it is cause for concern. Today’s data will lower expectations of future Fed rate hikes and will lead to downward revisions to Q1 GDP forecasts.
Along with the economic concerns, geopolitical risks remain elevated as well. Use of the very large MOAB ordinance against an ISIS position in Afghanistan heightens tensions in the middle east. Meanwhile, North Korea continues to hint at a possible nuclear test. There is speculation that the U.S. may launch a preemptive strike and the North Koreans have said they will retaliate if that were to happen. The Chinese are ramping-up pressure on Pyongyang in an apparent effort to defuse the situation.