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.
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/03-20-17
Gold starts the first week of Spring generally well bid. The yellow metal has added modestly to last week’s gains as investors digest the outcome of the weekend G20 meeting.
For some G20 partners the refusal of the US to commit itself clearly to free trade marked the first step down a dangerous road. — Financial Times
Worries about protectionism are keeping the dollar on the defensive. According to a Reuters article, the Chinese government is already planning to retaliate against any trade penalties initiated by America. There could be a trade war brewing.
Britain’s EU ambassador, informed the office of Donald Tusk, EU Council president, that Teressa May will trigger Article 50 on March 29. That will formally begin the Brexit process.
Chicago Fed dove Evans was out today trying to rebuild inflation worries after the University of Michigan inflation expectations gauge fell to a record low last week. Evans said that three rate hikes this year were likely, but a fourth is possible should inflation pick up.
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.
USAGOLD/Peter A. Grant/03-07-17
Gold remains defensive, edging to new three-week lows below 1222.10 amid rate hike expectations for next week and modestly higher dollar. However, with stocks under pressure and an several additional tiers of support below the market, the downside for the yellow metal is thought to be limited.
The Commerce Department announced this morning that the trade deficit surged to a five-year high of -$48.5 bln. “It was the largest monthly gap since a deficit of $50.2 billion in March 2012,” according to BusinessInsider.
It will be interesting to see how President Trump responds to this news, given his pledge to address trade imbalances. Be on the lookout for some weaker dollar rhetoric.
Later today we’ll see January consumer credit and a 3-year note auction. Focus this week remains squarely on the jobs report this Friday and then of course there is the March FOMC meeting next week.
Bitcoin has plunged back below the price of gold, dropping more than $100 in just a couple minutes. Additionally, SNAP — Wall Street’s darling from last week — continues to retrace its IPO gains.
USAGOLD/Peter A. Grant/03-06-17
Gold is easier to start the week. The yellow metal staged a nice rebound late in Friday’s session, rising more than $12 from the two-week and intraday low of 1222.10. Dips continue to be viewed as buying opportunities amid broad global uncertainty.
Global stocks are under pressure amid eroding risk appetite. Ongoing French election turmoil, China’s lower GDP target and the latest North Korean missile test are all contributing factors.
Additionally, Deutsche Bank announced yesterday that it would go back to the market in an effort to raise an additional $8.5 bln in capital. This will be the bank’s fourth capital raise since 2010 amid steep legal costs and persistent concerns that a bailout by the German government may still be necessary. DB shares are down sharply.
Deutsche Bank (DB) said it will seek to raise about €8 billion ($8.5 billion) in the coming weeks — its fourth capital hike since 2010. The four add up to a total of about €30 billion ($32 billion), more than the bank’s current market value. — CNNMoney
Weighing on gold is the expectation that the Fed will raise rates for the third time in a decade next week. FedSpeak in recent weeks has been extremely hawkish and as a result rate hike expectations have surged. Speaking in Chicago on Friday, Fed Chair Yellen said that “further adjustment of the federal funds rate would likely be appropriate” at the March FOMC meeting.
Keep in mind though: While gold sold-off in advance of the last two rate hikes, the yellow metal rallied after those hikes were announced. We’ll be looking for a similar trading pattern next week.
USAGOLD/Peter A. Grant/03-03-17
Gold slipped further in overseas trading, weighed by heightened expectations that the Fed will move to raise rates as early as March. Those expectations have been driven by aggressively hawkish FedSpeak.
More FedSpeak is on tap for today from Janet Yellen, VC Stanly Fischer, Chicago Fed dove Evans and Richmond Fed hawk Lacker, as well as Governor Powell. Gold may be defensive in anticipation of further hawkish biases. I’m wondering if at least Yellen will again mention concern about disappointing growth . . .
Also out today is February services ISM and Markit services PMI.
Despite the retreat from 15-week highs this past Monday, gold is still resilient in the face of those rate hike expectations, dollar strength and record stock market gains. As noted in yesterday’s DMR, the last time the dollar index was above 102.00, gold was trading below $1200.
USAGOLD/Peter A. Grant/03-02-17
Gold is back on the defensive as the dollar continues to climb. Initial jobless claims fell to a 44-year low last week, underpinning rate hike expectations even as Q1 growth forecasts fall.
FedSpeak continues to suggest that another rate hike would be appropriate “soon”. Cleveland Fed hawk Mester is expected to add his voice after the close today.
Stocks appear poised to start the session mixed, but remain generally well bid; riding the Trump tailwind. While the risk-on mentality may be tempering haven demand for gold, there continue to be signs that inflation is picking up.
Eurozone HICP inflation rose to the 2.0% target in February. January PPI surged to 3.5% y/y, up from 1.6% in December. In Germany, import price inflation surged to 6.0% y/y, up from 3.5% in December.
Meanwhile, Eurozone unemployment remains 9.6% and the last growth reading was +0.4% in Q4. Does the ECB dare tighten policy to tamp down inflation, at the risk of tipping the fragile economy into recession?
USAGOLD/Peter A. Grant/03-01-17
Gold is modestly defensive in the wake of President Trump’s much anticipated address to Congress. Stocks seem to love the speech, which focused on the repeal and replacing of Obamacare, a big tax overhaul, and a $1 trillion infrastructure program. Details were light on the latter.
Nonetheless, the address was well received for its more positive tone, even by some Democrats. CBS News reported that 40% of Democrats at least somewhat approved, while 18% strongly approved. Just maybe, the divisiveness that has dominated the first five-weeks of the Administration is easing somewhat. If that is indeed allowed to happen, our elected officials just might be able to get down to the business of governing our country.
Also weighing on gold was the more hawkish tone struck by NY Fed William Dudley, who more typically is quite dovish:
New York Fed President William Dudley, among the most influential U.S. central bankers, said on CNN that the case for tightening monetary policy “has become a lot more compelling” since the election of President Donald Trump and a Republican-controlled Congress. — CNN
Yields and the dollar both rose on this comment. While gold slipped, it continues to display signs of resilience in the face of normally negative market conditions. Anticipate buying interest to resurface on this dip.
USAGOLD/Peter A. Grant/02-28-17
Gold edged modestly higher after the Q4 GDP second report failed to see the upward revision that was expected. GDP in the last 3-months of 2016 held steady at 1.9%, which probably tempers rate hike expectations somewhat.
In addition, the U.S. trade deficit ballooned to -$69.2 bln. “This is the second largest deficit since August 2008,” according to the ZeroHedge blog and adds to the case that Q1 GDP could come in below 2% as well.
Dollar strength continues to be a big factor in driving the growing trade imbalance. I think it behooves the Fed not to do anything at this point to further buoy the dollar.
Later this morning we’ll see Case Shiller home price index, Chicago PMI, consumer confidence and the Richmond Fed index; along with Fedspeak from Philly Fed’s Harker, SF Fed’s Williams and St. Louis Fed’s Bullard.
This evening, President Trump will give his first address before a joint session of Congress. Focus will be on proposed fiscal spending, tax and regulatory reforms.
USAGOLD/Peter A. Grant/02-27-17
Gold starts the week just off the 15-week high set on Friday at 1260.12. With both the dollar and stocks lower, the downside for the yellow metal is seen as limited.
Durable goods orders for January came in above expectations at +1.8%, driven by both defense and non-defense aircraft orders. December was revised lower to -0.8% from -0.5% previously. However, ex-trans fell 0.2%, below expectations of +0.5%.
Later this morning we have January pending home sales index and the Dallas Fed Index, as well as FedSpeak from Dallas Fed President Kaplan.
Adding an additional layer of uncertainty to an already uncertain global political picture — which has been broadly supportive to gold — are expectations that Scotland will ask for another referendum to leave the UK. Continue to view downticks as buying opportunities.
USAGOLD/Peter A. Grant/02-24-17
Gold continues to charge higher, amid the realization that it may take some time before any fiscal policies implemented by the Trump administration to bear fruit. The yellow metal has set new 3-month highs just shy of 1260.00 thus far.
If growth is likely to remain soft, the Fed may be more cautious with regard to the pace of race hikes. Yields have slipped accordingly, which has brought the dollar under pressure. U.S. stocks appear poised to begin the day under pressure as well.
The U.S. calendar is light with January new home sales and the final University of Michigan sentiment read for February.
USAGOLD/Peter A. Grant/02-23-17
Gold has surged to new highs for the year and the dollar came under pressure as Treasury Secretary Steven Mnuchin spoke on CNBC this morning. Mnuchin tempered growth expectations by saying that it may take until the end of next year to see “sustainable growth of 3 percent or more.”
Mnuchin believes that the proposed tax overhaul is the best path toward that 3%+ growth, and he expects “very significant” tax reform to be passed before Congress’s August recess. Stocks like the notion of tax reform, but the dimmed growth prospects for the next 18-months or so might make the Fed even more cautious than they already are about tightening monetary policy.
Yields and the dollar came under pressure, pushing gold through resistance at 1244.71. That puts the yellow metal at new highs for the year and the highest level since mid-November. The technical picture remains very constructive.
USAGOLD/Peter A. Grant/02-22-17
Gold edged higher in overseas trading to bring the high for the year at 1244.71 back within striking distance. The yellow metal remains underpinned by haven interest and rising inflation concerns, despite firmness in the dollar associated with rate hike expectations.
Weakness in the euro continues to buoy the greenback as well, with rising Frexit worries overshadowing some better data out of the EU. Concerns over Grexit have ebbed somewhat as Greece agreed to legislate structural reforms to appease the IMF, keeping the latest bailout deal on the table. However, Marco Stringa, senior economist at Deutsche Bank thinks Italy still represents “the main risk to euro-area stability.”
The U.S. U.S. calendar has January existing home sales and the FOMC minutes from the January meeting. There will also be Fedspeak from Powell.
USAGOLD/Peter A. Grant/02-21-17
Gold has retreated into the range, weighed by higher yields and a stronger dollar. The greenback has been buoyed by revived rate hike expectations and a weaker euro that is sharply lower this morning on rising concerns over a possible Frexit (French exit of the EU).
Philly Fed President Harker said in an MNI interview this morning that he “would not take March off the table at this point.” Meanwhile, European Commissioner for Economic and Financial Affairs, Pierre Moscovici said that the election of Marine Le Pen “would be the end of the European project.”
Frexit would clearly be a much bigger deal than Brexit ever was and markets would be massively roiled. Moscovici went on to add that he “cannot imagine 50% of the French are crazy enough to vote for her.” It seems we’ve heard a number of such prophesies within the last year . . .
Markit manufacturing and services PMI for February is out later this morning. We also will see FedSpeak from Kashkari, Harker and Williams.
USAGOLD/Peter A. Grant/02-17-17
Gold continues to pressure the upside, putting the high for the year at 1244.71 to the test. Lower stocks and yields this morning are seen as supportive. The dollar index is trading slightly higher, but within yesterday’s range.
The economic calendar is quiet ahead of the long holiday weekend, with just January LEI out at 10:00ET. Expectations are for a 0.4% rise.
U.S. markets will be closed on Monday in observance of President’s Day. Canadian markets will be closed as well for Family Day.
USAGOLD/Peter A. Grant/02-16-17
Gold pushed higher to approach resistance marked by the 1244.71 peak from last week. A short term breach of this level would put the yellow metal at new 14-week highs.
This morning’s data had little impact on the market. Initial jobless claims rose modestly last week. Housing starts declined by 2.6% in January, but still came in higher than expected thanks to a positive revision to December. The Philly Fed index beat expectations by a wide margin.
The dollar has come under renewed pressure, despite recent upbeat data and heightened rate hike expectations. Even so, gold has fared quite well in the face of the 2-week rebound in the dollar index. If the dollar gives it all back, gold should continue its trend higher.
USAGOLD/Peter A. Grant/02-15-17
Gold has come under selling pressure following a round of generally upbeat U.S. economic data upped the prospects for a March rate hike. The yellow metal slipped below support at 1218.40/1217.51 before stabilizing somewhat.
The initial indication of hotter inflation provided yesterday by PPI did indeed carry over to consumer prices in January. CPI came in at +0.6%, twice expectations of +0.3%. Core came in at +0.3% on expectations of +0.2%.
Retail sales bested expectations in January at +0.4%, versus expectations of +0.1%. December was revised to +1.0% from +0.6% previously. The NY Empire State index surged to 18.7 in February, well above expectations of 7.0, versus 6.5 in January.
Janet Yellen testifies before the House later this morning. Her testimony yesterday before the Senate was interpreted as being rather hawkish. Today she has additional evidence that bolsters the case for another rate hike, perhaps as soon as the March FOMC meeting.
Yields are on the rise, bolstering the dollar and giving stocks pause. And yet there are still plenty of uncertainties out there as well — political, geopolitical and economic in nature — that just might give the Fed pause.
USAGOLD/Peter A. Grant/02-13-17
Gold came under renewed pressure in early U.S. trading, falling back to the low end of the recent corrective range. The global risk-on trade continues to buoy stocks, even with Japan’s Q4 GDP miss. U.S. shares still seem optimistic on President Trump’s promised “big news” on the corporate tax front.
I will tell you though that America’s biggest creditors aren’t dumping bonds because they suddenly have a higher risk appetite (see the Bloomberg article posted earlier this morning). They are ditching Treasuries because they sense there are heightened risks in the U.S. that are going to continue to weigh on bonds.
There is nothing on the U.S. calendar today, but the rest of the week is quite busy. Highlights include January PPI tomorrow and January CPI, retail sales and industrial production on Wednesday. Janet Yellen also appears before Congress on Wednesday.
USAGOLD/Peter A. Grant/02-09-17
Gold is consolidating recent gains within a narrow range. Momentum remains clearly to the upside in the wake of this week’s push through important resistance levels.
Initial jobless claims fell 12k last week to 234k, below expectations of 249k. Continuing jobless claims rose to 2,078k. Wholesale sales and M2 are out later this morning.
Today’s $15 bln 30-year bond auction will be watched closely after yesterday’s disappointing 10-year auction.
USAGOLD/Peter A. Grant/02-08-17
Gold continues to charge higher, pushing above 1240.00 for the first time in 3-months. The yellow metal continues to be buoyed by a solid safe-haven bid and a strong technical outlook that I outlined in yesterday’s DMR.
The GLD ETF has seen five consecutive days of inflows, the longest streak since last June. Billionaire investor Stanley Drucknemiller is back in the gold market as well, after famously selling his position on election night, he was a buyer again in December and January. “I wanted to own some currency and no country wants its currency to strengthen,” said Druckenmiller. The fact that he characterizes gold as a currency is salient.
The U.S. economic calendar is light today with EIA crude inventory data and a $23 bln 10-year note auction.
USAGOLD/Peter A. Grant/02-07-17
Gold has turned modestly corrective in the wake of solid gains on Monday. The yellow metal is being weighed as yields, the dollar and stocks are all higher this morning. Again, I’m impressed by gold’s resilience as haven demand continues to offer support.
In the Q&A session following his speech yesterday, Philly Fed’s Harker said that the March FOMC meeting is on the table for a potential rate hike. However, he acknowledged he has not made up his mind yet. That doesn’t really indicate much, but yields rebounded somewhat nonetheless.
The trade deficit narrowed slightly in December. Later this morning we’ll see JOLT job openings and consumer credit for December. There is also a $24 bln 3-year note auction.