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.
Gold remains firm near 5-month highs, despite the rebound in the dollar. Silver is also well bid, having taken out the February high at 18.48 in late trading on Wednesday.
Both gold and silver surged yesterday after President Trump said he the dollar is “getting too strong.” That knocked the greenback lower, inciting the precious metals to rally. While about half of those dollar losses have been retraced, gold and silver are holding their gains. That’s significant.
Initial jobless claims fell 1k last week. A rebound in claims of 10k had been expected.
PPI fell 0.1% in March. It was the first drop in 7-months. Core PPI came in unchanged, on expectations of +0.2%.
Preliminary Michigan Sentiment for April comes out later this morning. Median expectations call for a downtick to 96.8.
USAGOLD/Peter A. Grant/04-12-17
Gold is consolidating yesterday’s solid gains, but that move to new highs for the year and the close above the 200-day moving average keeps focus on the upside. Silver still needs to negate resistance marked by the February high at 18.48.
Geopolitical risks are the primary driving force at this point. The reception of U.S. Secretary of State Rex Tillerson in Moscow was reported to be “icey.” Tillerson warned the Russians that they risk becoming irrelevant in the Middle East by continuing to support Assad. The Russians warned Tillerson that the U.S. should not strike Syria again. Sounds less than productive.
U.S. import prices fell 0.2% in March, but export prices rose by 0.2%. Price risks remain uneven at best.
Later this morning we’ll see EIA crude stocks and hear FedSpeak from Dallas Fed hawk Kaplan. The Bank of Canada will also announce policy. They are widely expected to hold steady.
USAGOLD/Peter A. Grant/04-10-17
Gold is maintaining a consolidative tone after failing to sustain the move to new highs for the year on Friday. The fundamentals remain broadly supportive, which should limit the downside.
In particular, heightened geopolitical tensions between the U.S. and Russia over the Syrian situation should continue to foster safe-haven interest. Chinese state-run media was also critical of the U.S. attack on Syria, but only after President Xi had returned to China.
The Xinhua account of the Trump/Xi meeting did not mention North Korea, although both Presidents apparently agreed that the North Korean threat was “very serious”. Secretary of State Rex Tillerson reiterated that the U.S. would take its “own course” if China did not do more to rein in North Korea.
“President Xi clearly understands, and — and I think agrees, that the situation has intensified and has reached a certain level of threat that action has to be taken,” Tillerson said on Face the Nation yesterday. The USS Carl Vinson carrier strike group is reportedly been diverted toward the Korean Peninsula.
There is nothing on the U.S. economic calendar today. Fed chair Yellen is participating in a panel discussion at the University of Michigan.
USAGOLD/Peter A. Grant/04-07-17
Gold is sharply higher in the wake of the U.S. cruise missile strike against Syria. Key resistance at at 1263.87 has been negated, establishing new highs for the year. This also constitutes a definitive breach of the 200-day moving average, which is at 1256.67 today. A close above this level would be a bullish technical event.
Silver is pressuring the February high at 18.48 and has already recorded multiple closes above its 200-day MA. Look setup looks constructive for further gains.
March nonfarm payrolls are out shortly. Median expectations are +200k jobs. The unemployment rate is expected to hold steady at 4.7%.
Also on the agenda is the meeting between Presidents Trump and Xi. Trade, North Korea and China’s activities in the South China Sea will all be high on the agenda. I suspect the U.S. strike on Syria will be discussed as well.
USAGOLD/Peter A. Grant/04-06-17
Gold continues to consolidate near the high end of the recent range. Yesterday’s rebound on the FOMC minutes and the apparent loss of momentum in President Trump’s agenda keeps focus on the upside.
The minutes revealed that the central bank is worried that stocks are overvalued. Of course Fed policy is the primary contributor to that overvaluation. I guess if you create the bubble, its your job to ultimately try and deflate the thing before it pops on its own.
Late in the day, House Speaker Ryan acknowledged that tax reform will likely be a long process; longer than healthcare reform, which has stalled in the House. This should raise additional concerns among those long the overvalued stock market.
Much of the equity gains since election day were driven by optimism about Trump’s plan to deregulate, reform and spend on infrastructure. Suddenly none of that seems to be advancing . . .
If stocks rollover as a result, investors will be looking for a safe-haven. Some of the capital coming out of equity markets will assuredly find its way into gold.
Focus is now on tomorrow’s March jobs report. Expectations are for a 205k gain in nonfarm payrolls. The unemployment rate is expected to hold steady at 4.7%.
The weekend meeting between President Trump and President Xi of China is also being anticipated with great interest. Trade and North Korea are two hot topics that will be on the agenda.
USAGOLD/Peter A. Grant/04-05-17
Gold has retreated into the range once again, leaving the high for the year at 1263.87 intact. However, the downside is likely to remain limited by persistent political uncertainty, escalating geopolitical tensions, as well as the big weekend meeting between Presidents Trump and Xi.
Silver is actually slightly positive on the day, helping to underpin gold. The gold/silver ratio continues to press lower.
The ADP employment survey for March came in better than expected at +263k. Expectations were +238k, versus a negative revised +245k in February (was +298k). Expectations for Friday’s nonfarm payrolls data are +205k. The unemployment rate is expected to remain steady at 4.7%.
USAGOLD/Peter A. Grant/04-04-17
Gold is back within striking distance of key resistance at 1261.01/1263.87, where the highs for the year correspond closely with the 200-day moving average. Silver too is pressuring the high for the year set in February at 18.48.
Risk aversion seems to be driving the latest gains, with the dollar firm as well. U.S. stocks are called lower.
The U.S. trade deficit narrowed more than expected in February. Later this morning we’ll see Feb factory orders. ECB President Mario Draghi speaks in Frankfurt and we’ll hear Fedspeak from Governor Tarullo.
The RBA left its cash rate steady at 1.50%, as was widely expected. However, the statement implied that the RBA would like to keep the A$ weak.
The depreciation of the exchange rate since 2013 has also assisted the economy in its transition following the mining investment boom. An appreciating exchange rate would complicate this adjustment. — Philip Lowe, Governor
Does that make Australia a currency manipulator?
USAGOLD/Peter A. Grant/04-03-17
Gold starts the week in familiar territory; consolidating within last week’s range. The underlying bias remains to the upside. However, chart resistance at 1261.01/1263.87 — fortified by the 200-day moving average — needs to be cleared to perpetuate the uptrend.
As we noted on Friday, gold posted an 8% gain in Q1, outperforming all of the major stock indices by considerable margins. The exception was the NASDAQ, which rose 8.9%. Silver was up a solid 14%.
I’d guess an investor not completely tuned in to market activity would guess that the stock market was outperforming everything. So what is likely to happen if the reflationary trade is really delayed . . . or worse yet dead? All of stock gain since election day could be vulnerable to retracement and that should enhance the haven appeal of gold.
USAGOLD/Peter A. Grant/03-31-17
Gold is consolidating at the low end of this week’s range, weighed by a firm dollar and a rebound in U.S. yields. Offering support is political uncertainty both in the U.S. and Europe.
Personal income rose 0.4% in February, in line with expectations. However, PCE came in at just +0.1%, below expectations. This is disappointing in light of recent strength in consumer sentiment. Further pressure on Q1 growth expectations becomes likely.
Later this morning we’ll see Chicago PMI and the final Michigan sentiment read for March. FedSpeak from Dudley, Kashkari and Bullard.
USAGOLD/Peter A. Grant/03-30-17
Gold is modestly lower this morning, weighed by a firmer dollar and persistent hawkish FedSpeak. Silver is easier, but is maintaining gains above $18.
Offering support for the metals are political uncertainty, Brexit concerns and the medium term down trend in the greenback. Some uncertainty about stocks is offering some underpinning as well.
Initial jobless claims fell last week, but was still above expectations. Q4 GDP was revised up from 1.9% to 2.1%. That’s slightly better than the 2.0% that was expected, but it’s still a dramatic drop from the 3.5% Q3 pace. Prospects for Q1 growth continue to hover around 1%, according to the Atlanta Fed’s GDPNow model.
Later this morning we’ll see the Bloomberg Consumer Comfort Index for last week, EIA natural gas stocks, Ag prices for March and M2. Additionally, Fedspeak is due from Mester, Williams, Kaplan and Dudley.
USAGOLD/Peter A. Grant/03-29-17
Gold is modestly higher, still within striking distance of the highs for the year at 1263.87 from February. This week’s challenges of this level have reinforced the resistance, but the yellow metal remains underpinned by political uncertainty, a soft dollar and lower U.S. yields.
A definitive push through this area would be a significant technical event as it would also constitute a breach of the 200-day moving average. Upside follow-through would be likely.
Pending home sales for February and EIA crude data are out later this morning. We’ll also hear FedSpeak from Evans Rosengren and Williams.
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.
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.
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.
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.
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.
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 it.watch 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.
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.
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.
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.
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.
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.
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 . . .
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.