Category: Snapshot

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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Morning Snapshot: Gold retreats into range as stocks lurch higher

USAGOLD/Peter Grant/10-24-17

Gold has retreated into the range once again as stocks lurch higher. The dollar is firmer this morning as well, but solid resistance in the dollar index at 93.99/94.14 remains intact.

Political and geopolitical tensions continue to be seen as supportive for the yellow metal. The government of Catalonia is expected to respond to Spain’s demands on Thursday. Japan’s Defense Minister categorized the North Korea threat as having “grown to the unprecedented, critical and imminent level.”

Today’s U.S. economic calendar is light today with Markit PMIs for October and the Richmond Fed index. Tomorrow the BoC will announce policy, followed by the ECB on Thursday.

Both policy decisions and the guidance will be interesting, as recent data — particularly weak inflation — may have derailed tightening plans. If easier policy prevails, the Canadian dollar and euro may come under further pressure.

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Morning Snapshot: Gold remains defensive to start week

USAGOLD/Peter Grant/10-23-17

Gold remains under pressure as risk-appetite remains elevated, driving global shares higher. Last week’s passage of a 2018 budget resolution by the Senate further stoked hopes for President Trump’s proposed tax cuts.

Spanish Prime Minister Mariano Rajoy said over the weekend that he would seek to dissolve the Catalonian government under Article 155, thereby ending the region’s autonomy. The EU fell in line with Spain’s central government. However, Catalan foreign affairs spokesman Raul Romeva said, “the people and the institutions in Catalonia will not let this happen.” It would appear that a showdown is brewing.

Shinzo Abe has consolidated power as a result of the weekend snap election. Abe-nomics will continue, but he is also expected to modify Japan’s pacifist Constitution so that he can “deal with North Korea.” Japan needs to be able to defend itself, but this could mark the beginning of a new Asian arms race.

The U.S. calendar is very light today. The highlight of this week will be the ECB rate decision on Thursday.

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Morning Snapshot: Gold softens as advancement of budget/tax reform stokes risk appetite

USAGOLD/Peter Grant/10-20-17

Gold is back on the defensive within the range after the Senate narrowly passed the 2018 budget blueprint by a 51-49 vote. This bolsters hope that the GOP proposed tax reform will be advanced as well, prompting a rebound in risk appetite; as reflected by higher stocks.

Yields have rebounded as well, pulling the dollar higher, which has in turn pressured the yellow metal. The budget blueprint allows $1.5 trillion to be added to the deficit over the next 10-years. This is one of the keys to President Trump’s tax cut, borrow and spend reflation agenda.

Geopolitical risks are likely to limit the downside. Spain is expected to terminate Catlonia’s autonomy tomorrow. CIA Director Pompeo and National Security Advisor McMaster both seemed to suggest a heightened possibility of a military confrontation with North Korea at a security forum on Thursday.

The U.S. calendar is light today with just September existing home sales (-0.9% forecast) and Treasury Budget for September. We’ll also hear FedSpeak from Mester and Yellen.

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Morning Snapshot: Gold jumps as Spain prepares to revoke Catalonia autonomy

USAGOLD/Peter Grant/10-19-17

Gold is rebounding today and has already exceeded yesterday’s high amid reports that Spain will move to rescind Catalonia’s autonomy today. This unprecedented move has sapped risk appetite, weighing on global shares and pushing yields and the dollar lower.

Spanish PM Mariano Rajoy said that Article 155 would be invoked today, asserting direct rule over Catalonia. Rajoy says Spain seeks to “restore the constitutional order.” Put another way, this move seeks to crush the independence movement, but I doubt the separatist will go quietly into the night.

Again, it’s interesting to watch the dollar come under pressure at times of heightened geopolitical tensions. There was a time, not so long ago, when the dollar was THE safe-haven currency. That is no longer the case.

U.S. economic data were mixed this morning. Initial jobless claims fell 22k last week. The Philly Fed index for October came in much better than expected. However, leading indicators fell 0.2% in September, below expectations of +0.1%.

We’ll hear FedSpeak from Ester George later this morning as well, as prospects for a December rate hike remains elevated.

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Morning Snapshot: Gold remains defensive as dollar/yields rise

USAGOLD/Peter Grant/10-18-17

Gold remains defensive after recent gains above $1300 faltered as talk about a potentially hawkish replacement for Janet Yellen began to circulate. That story continues to play out this morning, buoying yields and the dollar and pressuring the yellow metal.

As I wrote in yesterday’s DMR, appointing a hawk like John Taylor to chair the Fed risks derailing any hope that President Trump’s reflation agenda gets off the ground. What Mr. Trump really needs is an unabashed dove like Janet Yellen, or as DoubleLine Capital’s Jeff Gundlach speculated last week, Neel Kashkari.

U.S. housing starts and permits plummeted in September, well below the expectations of analysts who were already expecting a hurricane related slow down. Later today we’ll see EIA crude stocks and the Beige Book. FedSpeak from Dudley and Kaplan is already trickling out of a moderated discussion on economic development.

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Morning Snapshot: Gold retreats into range as dollar firms

USAGOLD/Peter Grant/10-17-17

Gold retreated into the range after failing to sustain recent probes above $1300, as the dollar firmed. However, political and geopolitical risks are still seen as supportive underpinnings to this market.

U.S. trade prices came in hotter than expected for September, with a 0.7% gain for imports and a 0.8% rise in export prices. Higher energy prices associated with the hurricanes contributed to the rise in import prices. While these gains may prove temporary, these data bolster the position of the policy hawks on the FOMC calling for a December rate hike.

Look for the probability of a rate hike to go back above 90%, which is pushing the dollar higher. However, with expectations already all-but a sure thing, there’s not much more room for improvement and gold has been holding up pretty well. There’s also still plenty of time before that December meeting.

U.S. industrial production rose 0.3% in September, in line with expectations, versus an upward revised -0.7% in August (was -0.9%). Cap use edged up to 76.0%, from a negative revised 75.8% in August (was 76.1%).

Later this morning we’ll see the NAHB housig market index for October, Treasury budget for September and August TIC data. We’ll also hear FedSpeak from Philly Fed’s Harker.

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Morning Snapshot: Gold firm above $1300

USAGOLD/Peter Grant/10-16-17

Gold remain well bid above $1300, having ended last week on an upswing. The next technical hurdle is defined by resistance at 1308.80/1313.62. A breach of this level would return confidence to the dominant uptrend.

The dollar index is modestly higher, but momentum on recent uptricks has been lackluster. Fed funds futures suggest the probability of a December rate hike remains near 90%. These factors are limiting the upside.

North Korea has renewed its threat to fire missiles toward Guam as U.S. and South Korean forces begin new naval drills. Spain is still waiting for clarification from Catalonia as to whether they declared independence or not last week. If they did, or they do not respond by Thursday, Spain has threatened to impose direct rule.

The U.S. calendar is light today. NY Empire State index surged to an 8-year high of 30.2 in October, well above expectations of 20.0, versus 24.4 in September. September Treasury budget is out this afternoon

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Morning Snapshot: Gold pops back above $1300 after data

USAGOLD/Peter Grant/10-13-17

Gold jumped back above $1300 after a tame core CPI print for September, shows that the Fed continues to face an inflation problem. Headline inflation rose 0.5%, the biggest m/m jump since January, but it was still below expectations of +0.6% and attributed to hurricane distortion.

Like PPI yesterday, higher energy prices in the wake of the recent hurricanes pushed the broader measures of inflation higher. However, these gains are unlikely to be sticky.

This morning’s gains put the yellow metal decisively back above the entire 20-, 50-, 100- and 200-day moving average complex, returning considerable credence to the underlying uptrend. Next resistance is at 1308.80, the halfway back point of the decline off the September peak at 1357.50.

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Morning Snapshot: Gold re-approaches $1300

USAGOLD/Peter Grant/10-12-17

Gold re-approached the $1300 level in overseas trading, buoyed by heightened geopolitical tensions and a toppy-looking dollar. The yellow metal has retreated modestly intraday in the wake of warmer than expected inflation data.

U.S. PPI rose 0.4% in September, stoked by hurricane distortions and in line with expectations. Core PPI jumped +0.4% as well, which was above expectations of +0.2%.

Initial jobless claims fell 15k last week, suggesting that the hurricane effect on labor may already be reversing. However, it remains to be seen if that will be sufficient to reverse the existing downtrend in payrolls that had developed long before this hurricane season.

A move back above $1300 would put gold above the 20- and 50-day moving averages, returning confidence to the dominant uptrend. The halfway back point of the recent correction comes in at 1308.80.

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Morning Snapshot: Gold consolidates below $1300

USAGOLD/Peter Grant/10-11-17

Gold is consolidating below the $1300 level as traders await the minutes of the September FOMC meeting. Geopolitical tensions and a softer dollar are seen as being supportive to the yellow metal.

The Fed paused the recent tightening cycle in September amid persistently sluggish inflation. The minutes will perhaps provide some additional clarity as to just how concerned the members are and if current market expectations for a December hike are realistic.

Recent gains in the dollar index stalled well shy of the 100- and 200-day moving averages. The trend is still down and negation of this 92.90/88 support level would return considerable confidence to that trend, which should push gold higher.

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Morning Snapshot: Gold more than $30 off Friday’s low

USAGOLD/Peter Grant/10-10-17

Gold extended to the upside in overseas trading amid rising geopolitical risks and mounting concerns that the President is going to have difficulties passing tax reform. The yellow metal is up more than $30 since hitting an 8-week low at 1260.10 on Friday.

Catalonian President Puigdemont is slated to address parliament today and is expected to declare independence from Spain, or at least a movement toward independence. Spanish PM Rajoy has vowed that “Spain will not be divided” and that he is prepared to employ “all means” within the law to preserve national unity.

Bloomberg has reported that Spanish National Police are in place and prepared to arrest Puigdemont. If the Catalan police attempt to shield Puigdemont, there is the risk of violence. However, it is the longer-term and broader implications for Spain and Europe that are of concern to markets.

The Hill reports this morning that based on recent rhetoric, Kim Jong Un may believe that a U.S. decapitating strike is imminent. That may prompt the North Korean leader to launch a preemptive strike.

There is growing concern that President Trump’s tax reform plan is losing momentum. This had been a big driving force in the stock market rally as investors salivated over the proposed corporate tax cut. This is a must-win issue for the President, given the failure of repeal-and-replace and the lack of progress on immigration reform and the the wall.

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Morning Snapshot: Gold firms on geopolitical risks, “startling” drop in U.S. payrolls

USAGOLD/Peter Grant/10-09-17

Gold starts the week at a 5-session high after finding support on Friday at the 1260.00 level in the wake of September’s negative nonfarm payrolls print. Heightened geopolitical tensions are also providing support to the yellow metal.

St. Louis Fed President James Bullard called the negative NFP number “startling” and said more data were needed before committing to a December rate hike. Nonetheless, Fed funds futures continue to suggest the probability of a rate hike is all-but a sure thing.

There will be quite a bit of FedSpeak again this week. We’ll see if anyone else is troubled by the deterioration in the labor market. As noted in commentary on Friday, the trend in payrolls rolled over long before this hurricane season.

Geopolitical tensions are on the rise again amid expectations of an impending North Korean missile tests. The UK is reportedly developing a war plan as such a test may result in a U.S. military response.

The Treasury market and the Fed are closed today for Columbus Day. However, Chinese investors are back in the mix after the long Golden Week/National Day holidays.

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Morning Snapshot: Gold defensive as markets shrug-off weak jobs data as weather distortion

USAGOLD/Peter Grant/10-06-17

Gold remains defensive, edging to a new 7-week low as the market seems inclined — at least initially — to shrug off the weak headline jobs data as hurricane distortion. The dollar index reached a 10-week high, modestly exceeding the August high at 94.15.

U.S. nonfarm payrolls fell 33k in September, well below expectations of +87k, versus a positive revised 169k in August (was +156k). July was revised down to 138k, from 189k previously.

While the hurricanes clearly affected the data in September, payrolls began trending lower earlier in the year, before the bad weather rolled in. This may in reality not be transitory at all. So the question now is, how will the Fed view the data? They will likely be encouraged by the beat in earnings.

There is FedSpeak from Kaplan, Bostic, Dudley and Bullard today, so we won’t have to wait long for the central bank’s initial spin. In fact, Dalls Fed hawk Kaplan has already indicated on CNBC that he’s “not there yet” with regard to a December hike, but is open minded.

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Morning Snapshot: Gold consolidates ahead of tomorrow’s NFP data

USAGOLD/Peter Grant/10-05-17

Gold is consolidating within yesterday’s range as the market looks ahead to tomorrow’s jobs report. Solid resistance in the dollar index has capped the upside thus far, which is helping underpin gold as well.

U.S. initial jobless claims fell 12k last week as hurricane affects work there way through the system. However, a soft 87k rise in nonfarm payrolls is anticipated for September, with perhaps some downside risk based on the ADP jobs survey miss yesterday.

Recent strength in PMI data has pushed December rate hike expectations back above 80%, but weak jobs data could reverse that bias. If rate hike expectations dim again, look for the greenback to retrace recent gains, shich should bolster gold.

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Morning Snapshot: Gold firms as dollar retreats from resistance

USAGOLD/Peter Grant/10-04-17

Gold firmed in overseas trading after the dollar backed off its recent highs. While some of the yellow metal’s gains have already been retraced, the dollar is up against a formidable resistance level and is quite overbought.

The U.S. ADP jobs survey came in below expectations, weighed by weather affects. This sets up some downside risk for the already weak September nonfarm payrolls expectations.

Reuters is reporting that Catalonia will declare independence from Spain on Monday. Does Mariano Rajoy and the government of Spain allow that to happen? Given the violence already used in an effort to squelch the referendum, will they go so far as to shut down the Catalonian Parliament?

Jeff Gundlach is predicting that Neel Kashkari will be the next Fed chair. “He happens to be the most easy money guy that’s in the Federal Reserve system today and that’s why he may win,” said Gundlach. That’s the exact reason that I thought he might seek to reappoint Yellen and why Kevin Warsh was an unlikely candidate. Easy policy and a weak dollar would certainly make execution of President Trump’s economic agenda more likely to be successful.

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Morning Snapshot: Gold remains soft near 6-week lows

USAGOLD/Peter Grant/10-03-17

Gold is trading in a narrow range, having edged to a new 6-week low overseas. Heightened risk appetite and December rate hike expectations have sparked a rebound in the dollar over the past three-plus weeks, which has weighed on the yellow metal.

Today’s economic calendar is very light with just September auto sales. Traders may already be looking ahead to Friday’s jobs data. Median expectations for nonfarm payrolls is just +87k. The unemployment rate is expected to hold steady at 4.4%.

Additionally, Chinese markets are closed this week for the Golden Week holiday, which is likely sapping Asian demand. This year they are calling it a “Super” Golden Week because the Mid-Autumn Festival coincides with the National Day holiday. China’s tourism administration says they expect about half of the 1.3 billion population to be on the move this week.

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Morning Snapshot: Gold maintains defensive posture to begin the week

USAGOLD/Peter Grant/10-02-17

Gold remains on the defensive after Friday’s soft close. The yellow metal is being weighed by a rebound in the dollar to challenge last week’s highs and revived risk appetite amid investor hopes for U.S. tax cuts.

Dollar gains are primarily associated with euro weakness in the wake of the Catalonia referendum that has thrown Spain — and the broader EU — into crisis.

Today’s calendar includes Markit manufacturing PMI and U.S. manufacturing ISM for September, as well as construction spending for August. We’ll also hear FedSpeak from Dallas Fed hawk Kaplan.

While the geopolitical rhetoric between the U.S. and North Korea is still flying, the recent absence of new DPKR missile and nuclear tests has pushed the still percolating conflict off the front page. South Korea is anticipating that fresh North Korean provocations are in the offing for this month.

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Morning Snapshot: Gold firms as core PCE inflation hits 2-year low

USAGOLD/Peter Grant/09-29-17

Gold is modestly firmer as the dollar continues to retrace recent gains. In the wake of yesterday’s simple hook reversal (lower low, higher close), some upside follow through would be expected as shorts take profits ahead of the weekend.

U.S. personal income rose +0.2% in August in line with expectations, tempering optimism that sprang from the +0.4% print in July. PCE rose 0.1%, also in line with expectations. Core PCE — the Fed’s favored measure of inflation — fell to 1.29% y/y, a two-year low.

The PCE data further erodes the weak inflation is “transitory” meme, bolstering Janet Yellen’s self-assessment that she and her colleagues may have “misjudged” on inflation. Today’s data should temper December rate hike expectations, helping gold.

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Morning Snapshot: Gold stabilizes, but remains defensive

USAGOLD/Peter Grant/09-28-17

Gold extended to the downside in overseas trading before stabilizing near unchanged. The dollar has eased somewhat after eking out a 6-week high in earlier trading, helping to buoy gold.

U.S. Q2 GDP (3rd report) was revised up to 3.1%, in line with expectations, versus 3.0% previously and 1.2% in Q1. The U.S. advanced goods trade gap narrowed to -$62.9 bln in August. U.S. initial jobless claims rose 12k to 272k last week, above expectations of 268k.

Later this morning we’ll get August agriculture prices and M2 for the week ended 18-Sep. FedSpeak is due from George, Fischer and Bostic.

China has ordered that all North Korea connected business be shut down within 120-days. This forceful move by the DPKR’s closest ally may move the ball on a diplomatic solution. However, more provocative actions by North Korea are still anticipated, which is an underpinning of the gold market.

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Morning Snapshot: Gold remains under pressure as yields, dollar rise

USAGOLD/Peter Grant/09-27-17

Gold remains defensive in the face of a rising dollar and the rising belief that the Fed will hike rates in December, regardless of weak inflation and growth risks. The yellow metal is slipped to new 4-week lows below 1287.50.

Fed Chair Yellen said yesterday that gradual rate hikes remain appropriate, despite misjudgements on the labor market and inflation. While she opened the door for a possible reversal of course, the market ignored that and prospects for a December rate hike jumped. Yields and the dollar rose as well, putting gold under pressure.

Todd ‘Bubba’ Horwitz, writing for KitcoNews, contends that Yellen essentially admitted that the Fed is “clueless”.

The real story is simple — all markets are on edge and looking to make big moves in one direction or the other. Looking into my crystal ball, I would expect equities, bonds, the euro currency and oil to break to the downside while gold, the U.S. dollar and commodities go higher. — Todd ‘Bubba’ Horwitz

U.S. durable goods order rebounded more than expected in August, although the overall trend remains troubling. The August pending home sales index and EIA crude data for last week are out later this morning. We’ll also hear FedSpeak from Bullard, Brainard and Rosengren.

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Morning Snapshot: Gold probes back below $1300 as dollar gains

USAGOLD/Peter Grant/09-26-17

Gold has retraced some of yesterday’s North Korea inspired gains, ticking back below $1300. The dollar index is testing 3-week highs, putting additional pressure on the yellow metal.

While markets seem increasingly inclined to quickly shrug-off the bellicose rhetoric and aggressive provocations from both North Korea and the U.S., the threat of an accidental conflict is very real. “The North Koreans assume that the threats will be enough to restrain US action but the US might be thinking the same thing, so you end up in a situation where a provocation from one side is seen by the other as an actual move towards war,” said Rodger Baker of Stratfor.

Today’s U.S. calendar has the Case-Shiller home price index for July, new home sales for August, consumer confidence for September and the Richmond Fed index. We’ll also hear FedSpeak from Brainard and Bostic. Janet Yellen will speak on “Inflation, Uncertainty, and Monetary Policy” this afternoon in Cleveland. That should be interesting . . .

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Morning Snapshot: Gold starts the week on defensive footing

USAGOLD/Peter Grant/09-25-17

Gold starts the week in a defensive posture, but still within last Thursday’s range. No significant escalations of the North Korean situation has heightened risk appetite somewhat, and a firmer dollar has weighed on the yellow metal.

The Chicago Fed National Activity Index sank to -0.31 in August. The Dallas Fed index comes out later this morning. We’ll also hear FedSpeak from Dudley, Evans and Kashkari.

Japanese PM Shinzo Abe announced that he will dissolve the lower house of parliament this week and consolidate his political power amid the looming North Korean threat. “We must not give into the threat of North Korea. I hope to gain the confidence of the people in the upcoming election and push forward strong diplomacy,” said Abe.

Here in the States, Republicans are scrambling to revise their latest healthcare bill in order to avoid yet another defeat on that front. Another legislative failure would further undermine the majority party and the President, making it increasingly unlikely that the economic agenda will be advanced this year in any meaningful way.

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Morning Snapshot: Gold steady ahead of Fed

USAGOLD/Peter Grant/09-20-17

Gold begins the U.S. sessions slightly higher, as the consolidation ahead of this afternoon’s Fed policy announcement continues. Despite the past week of corrective/consolidative activity, the underlying trend remains positive.

The Fed is expected to hold steady on policy today, but announce some details about balance sheet normalization. The FOMC will also provide their economic projections and Janet Yellen will hold a press conference.

After President Trump’s fiery speech at the UN General Assembly, there is speculation that North Korea will respond with more missile tests. The longer and louder the sabers are rattled, the more likely it becomes that they are drawn.

The rest of the calendar is light today, with August existing home sales and EIA crude stocks.

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Morning Snapshot: Gold consolidates at low end of recent range

USAGOLD/Peter Grant/09-19-17

Gold is consolidating at the low end of the recent range as the FOMC begins their two-day meeting. Heightened risk appetite and profit taking ahead of the Fed meeting has weighed on the yellow metal since last week.

Meanwhile, geopolitical and political tensions are seen as underpinning the market. While the dollar has firmed against the yen, driven by the risk-on attitude, the broader dollar remains weak.

Import and export prices rose more than expected in August, providing further evidence that inflation may finally be picking-up. I remain skeptical.

Housing starts dipped to 1.18M pace in August, just above expectations of 1.175M. Meanwhile, the U.S. Q2 current account gap widened to -$123 .1 bln, outside expectations of -$112.6, versus a revised -$113.5 bln (was -$116.8).

When the Fed announces policy tomorrow, they are widely expected to hold steady on policy. Markets are very interested to hear specifics on balance sheet normalization and to glean any clues as to the Fed’s intentions for December. That evidence might be found in the economic projections and Ms. Yellen’s press conference.

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Morning Snapshot: Gold remains defensive ahead of Fed meeting

USAGOLD/Peter Grant/09-18-17

Gold remains in corrective mode. The yellow metal slipped in overseas trading to a fresh two-week low amid heightened risk appetite carried over from last week.

With the dollar still generally defensive and geopolitical tensions still elevated, downticks in gold seem to be position squaring ahead of this week’s FOMC meeting. While the Fed is expected to hold-pat, they may make an announcement about balance sheet normalization. A December rate hike remains a 50/50 proposition.

The two-day Fed meeting begins tomorrow. Also, tomorrow will be the General Debate at the UN General Assembly. North Korea will certainly be a hot topic.

The economic calendar is light today with the NAHB Housing Market Index for September and TIC data.

The Atlanta Fed’s GDPNow index for Q3 tumbled from 3.0% to 2.2% last week as hurricane effects take hold. Private GDP forecast are under pressure as well. All of this will give the Fed pause when it comes to further tightening this year.

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Morning Snapshot: Gold retreats, but remains within yesterday’s range

USAGOLD/Peter Grant/09-15-17

Gold is trading lower, but within the confines of yesterday’s range. The yellow metal shrugged off North Korea’s latest missile launch, perhaps as such expectations had been previously priced in by the market.

South Korea test-fired missiles of its own in response to the latest provocation. The DPKR missile was the second to overfly Japan in less than a month. This, along with the recent bellicose threats to “sink” Japan, is driving conversations about increasing Japan’s military capabilities.

If Japan and South Korea were to increase military spending, China would likely respond in kind. That may result in an Asian arms race. And when a country has a lot of high tech weaponry, there’s always some faction that wants to use them . . .

Disappointing U.S. economic data should limit the downside for gold as well. Both August retail sales and industrial production missed expectations by significant margins. The Empire State Index for September, but not as much as was expected. The initial University of Michigan consumer sentiment reading for September comes out later this morning.

The dollar index has now retraced more than 61.8% of its recent correction, returning focus to the downside. The weaker dollar should underpin gold as well, suggesting the dip in gold is a buying opportunity.

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Morning Snapshot: Gold dips on CPI beat, but quickly bounces back

USAGOLD/Peter Grant/09-14-17

Gold dipped briefly to a new low on the week after CPI for August came in just above expectations. The pickup in inflation, albeit slight, perhaps breathes a little life back into the prospect for one more rate hike before year-end.

U.S. CPI rose 0.4% in August, above expectations of +0.3%, versus +0.1% in July; +1.9% y/y. Core CPI was up 0.2%, in line with expectations; +1.7% y/y.

The BoE held steady on rates, as was widely expected. However, there were two dissents and the MPC believes “some withdrawal of monetary stimulus is likely to be appropriate over the coming months.” The prospect of tighter policy ahead pushed Sterling to new one-year highs.

North Korea let loose with another salvo of bellicose rhetoric in the wake of the latest UN sanctions, threatening to “sink” Japan and turn the U.S. into “ashes and darkness.” Amid speculation of another impending missile test, the yellow metal should remain underpinned by elevated geopolitical tensions.

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Morning Snapshot: Gold consolidates within range established early in the week

USAGOLD/Peter Grant/09-13-17

Gold is consolidating corrective losses seen earlier in the week. Heightened risk appetite is applying the pressure, while persistent political and geopolitical risks underpin the yellow metal.

U.S. PPI rose 0.2% in August, below expectations of +0.3%, versus -0.1 in July. Core PPI rose just 0.1%, also below expectations. Tomorrow we’ll get July CPI. The ongoing absence of inflation is going to make it difficult for the Fed to further tighten policy this year.

Further unwinding of December rate hike expectations will keep pressure on the dollar. This week’s correction in the greenback has already lost momentum, with the bias definitely to the downside. Further retracement of Monday’s gains in the dollar index would shift focus back to the multiyear low set last week at 91.13. A weak dollar will continue to provide a tailwind for gold.

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Morning Snapshot: Gold defensive on heightened risk appetite

USAGOLD/Peter Grant/09-12-17

Gold remains defensive amid renewed stock market optimism as Irma weakens and North Korea remains quiet in the face of fresh UN sanctions. U.S. yields are higher, underpinning the dollar amid heightened risk appetite.

The U.S. calendar is light today with JOLT job openings for July and the NFIB Small Business Optimism Index for August, which ticked higher. Focus remains on inflation data later in the week and then next week’s FOMC meeting.

“We are done trying to prod the regime to do the right thing, we are now trying to stop it from having the ability to do the wrong thing,” said U.S. ambassador to the UN Nikki Haley yesterday. She did rattle the saber some as well by saying, “[I]f the North Korean regime does not halt its nuclear program, we will act to stop it ourselves.”

The new sanctions cap oil imports, but did not go so far as to completely block imports. Perhaps that’s a chip to still be played if the DPKR continues to advance their nuclear and missile programs.

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