Category: Snapshot

Morning Snapshot: Gold rebounds within last week’s range

USAGOLD/Peter Grant/08-23-17

Gold has rebounded, but remains narrowly confined within the range established last week. The yellow metal continues to be supported by political and geopolitical uncertainty and the attendant soft dollar.

Political uncertainty intensified after President Trump threatened to shut down the government in order to secure funding for the pledged border wall.

“If we have to close down our government, we’re building that wall.” — President Donald Trump

This morning we’ll see Markit PMIs, new home sales for July and EIA crude stocks for last week. We’ll also hear FedSpeak from Dallas Fed President Kaplan.

The market is unlikely to move significantly in either direction until after the speeches by Janet Yellen and Mario Draghi on Friday. While both are expected to stick to their respective scripts, Jackson Hole has been a venue where policy shifts have been floated in the past.

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Morning Snapshot: Gold choppy at high end of range

USAGOLD/Peter Grant/08-22-17

Gold continues to trade within the recent range below $1300. Gold is oscillating as risk appetite ebbs and flows amid varied political and geopolitical risks. However, those risks should keep gold underpinned.

President Trump’s speech last night suggests the U.S. is in Afghanistan to stay. He also ratcheted-up pressure on Pakistan, calling them out for providing “safe havens for terrorist organizations.” Mr. Trump then called for a strategic counter-terror partnership with India, Pakistan’s primary regional rival.

The U.S. calendar has the FHFA home price index for June as well as the August Richmond Fed index. Later this week we’ll get July durable goods orders and big speeches in Jackson Hole from Fed Chair Yellen (financial stability) and ECB President Draghi (fostering a dynamic global economy).

Yesterday Treasury Secretary Mnuchin went to Ft. Knox to check on our gold. I’m happy that his assessment is that the “gold is safe.”

However, an audit of the reserve asset that makes up 74.5% of America’s total reserves still seems appropriate. Is the gold really safe if there are multiple claims on those ounces?

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Morning Snapshot: Gold firms as geopolitical tensions ratchet higher again

USAGOLD/Peter Grant/08-21-17

Gold firmed overseas as North Korea ramped-up the saber rattling in reaction to joint military exercises between the U.S. and South Korea commenced today. While the yellow metal was not able to sustain the initial probe above $1300 on Friday, further tests may be in the offing.

“The Korean People’s Army is keeping a high alert, fully ready to contain the enemies. It will take resolute steps the moment even a slight sign of the preventive war is spotted,” threatened the North Korean state-run newspaper Rodong Sinmun. According to CNN, they went on to warn that “neither Guam, Hawaii nor the US mainland can ‘dodge the merciless strike.'”

The economic calendar is quiet today. The Chicago Fed National Activity index fell to -0.01 in July, versus positive revised 0.16 in June. The eclipse later today will likely disrupt markets and commerce as everyone will be outside looking to the sky with cardboard sunglasses.

Later this week, focus will shift to the KC Fed’s Jackson Hole Symposium. Both Mario Draghi and Janet Yellen speak on Friday.

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Morning Snapshot: Gold rallies to new highs for the year

USAGOLD/Peter Grant/08-18-17

Gold extended to the upside driven by risk aversion. Yesterday’s terror attack in Spain further sapped risk appetite that has been weighed recently by heightened geopolitical, political and economic risks.

The yellow metal eked out new highs for the year above 1296.06. A convincing push above $1300 would shift focus to last summer’s peak at 1375.15.

The dollar has eased as well, offering additional support for gold. The corrective uptick in the greenback over the past two-weeks never amounted to much. Critical support defined by the 91.92 low from May of 2016 is considered vulnerable.

Canada continues to struggle with low inflation as well. July CPI was unchanged. While annualized inflation ticked up to 1.2%, this is well below the BoC target.

The U.S. calendar is light with just preliminary Michigan consumer sentiment for August. We’ll also hear FedSpeak from Dallas Fed President Robert Kaplan.

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Morning Snapshot: Gold remains firm on dovish Fed

USAGOLD/Peter Grant/08-17-17

Gold remains well bid in the wake of yesterday’s more dovish than expected FOMC minutes, even as the dollar has recovered. Last week’s high at 1292.05 was pressured, but has capped the upside thus far.

Heightened concern about the lack of inflation evident in the FOMC minutes was interpreted as being dovish. However, changes in Fed funds futures have been limited thus far. A September rate hike remains off the table, while December is still a toss-up.

Initial jobless claims fell 12k last week to 232k. The Philly Fed Index fell to 18.9, which was better than expectations of 18.0. Later this morning, we’ll get July industrial production, which is expected to rise 0.3%.

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Morning Snapshot: Gold remains defensive at the low end of yesterday’s range

USAGOLD/Peter Grant/08-16-17

Gold is narrowly confined at the low end of yesterday’s range. Diminished geopolitical risks are putting modest pressure on the yellow metal, inciting investors to move back into ricks assets. However, a host of other risks underpin and nobody really believes the North Korean situation is anywhere close to being resolved.

U.S. housing starts tumbled 4.8% in July to a 1.155M pace, below expectations of 1.220M, versus a negative revised 1.213M in June. Minutes of the July FOMC meeting come out later today and markets will be looking for any clues about the likelihood of another rate hike this year. It’s pretty much baked into the cake that won’t happen in September, but December remains a toss-up.

The U.S. Air Force conducted training exercises with Japanese Self Defense Force pilots. “These training flights with Japan demonstrate the solidarity and resolve we share with our allies to preserve peace and security in the Indo-Asia-Pacific,” the U.S. Air Force said.

A large U.S./South Korea military exercise begins later in the month. There are plenty of opportunities for this situation to spin back out of control.

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Morning Snapshot: Gold comes under additional corrective pressure

USAGOLD/Peter Grant/08-15-17

Gold came under additional corrective pressure on diminished geopolitical risks and following better than expected retail sales data from July. However, price action remains confined to last week’s range.

North Korea walked back its threat to launch missiles on the U.S. territory of Guam. Although North Korea is prepared for such an attack, they said they would watch what “the foolish Yankees” do before making a decision.

U.S. retail sales rose 0.6% in in July, above expectations of +0.4%, versus a positive revised +0.3% in June. Retail sales excluding autos rose 0.5%, on expectations of +0.3%. The Empire State Index also bested expectations. U.S. export prices were hotter than expected, while import prices rose slightly, inline with expectations.

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Morning Snapshot: Gold eases along with North Korean tensions

USAGOLD/Peter Grant/08-14-17

Gold eased in overseas trading to begin the week as U.S. and South Korean officials played-down the possibly of war. The retreat from in front of 1296.06/1300.00 leaves the upside protected for the time being, but thos morning’s dip already seems to be attracting buying interest.

“I am certain the United States will respond to the current situation calmly and responsibly in a stance that is equal to ours,” said South Korean President Moon Jae-in. U.S. National Security Adviser H.R. McMaster said, “I think we’re not closer to war than a week ago, but we are closer to war than we were a decade ago.”

This talk is much more tempered than some of the fiery rhetoric from both sides heard last week. However, things could escalate again if North Korea conducts another missile test, as some are anticipating.

The U.S. calendar is quiet today. July retail sales along with import and export prices are out tomorrow. Later in the week we’ll see industrial production and LEI.

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Morning Snapshot: Gold jumps to 9-week high on weak CPI

USAGOLD/Peter Grant/08-11-17

Gold continues to march higher, reaching a new 9-week high of 1292.05 and bringing the high for the year at 1296.06 within reach. Silver remains firm above $17.

Geopolitical tensions remain elevated, with President Trump tweeting this morning that “Military solutions are now fully in place,locked and loaded,should North Korea act unwisely.” China has cautioned both sides about the sabre-rattling, but also reportedly have told North Korea that they are on their own if they start a fight with the U.S.

U.S. CPI rose 0.1% in July, below expectations of +0.2%, versus unchanged in June; 1.7% y/y. Core CPI rose 0.1% on expectations of +0.2%, versus +0.1 in June; 1.7% y/y. This latest evidence of waning inflation pressures is likely to further erode rate hike expectations through year-end. It may also give the Fed pause when it comes to beginning the balance sheet unwind this year.

A short-term move in gold above 1296.06/1300.00 would signal that the uptrend this year is back underway. Beyond that level, the next significant tier of resistance is marked by last year’s high at 1375.15.

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Morning Snapshot: Gold and silver add to gains

USAGOLD/Peter Grant/08-10-17

Gold extended to the upside, bringing the high for the year at 1296.06 from June within striking distance. Silver is trading with a 17 handle for the first time in 8-weeks.

The precious metals continue to be buoyed by heightened geopolitical tensions between the U.S. and North Korea. Serious talk about a potential nuclear exchange is understandably unnerving, which is inciting investors to move into safe-havens. And the safest of all safe-havens is gold.

North Korea’s state-run news agency reiterated the threat of a nuclear strike on Guam this morning. KCNA reported that the military is “seriously examining the plan for an enveloping strike at Guam through simultaneous fire of four Hwasong-12 intermediate-range strategic ballistic rockets in order to interdict the enemy forces on major military bases on Guam and to signal a crucial warning to the U.S.”

July PPI came in at -0.1%, below expectations of +0.1%; slowing to a 1.9% annualized pace. Core PPI was -0.1%, below expectations of +0.2%, bringing the annualized rate down to 1.8%.

This additional evidence that price pressures are on the wane will further erode rate hike expectations for the remainder of the year. It may also give the Fed pause when it comes to beginning balance sheet normalization.

CPI is out tomorrow. Headline and core CPI are both expected to come in at +0.2%. Misses will be just another nail in the tightening cycle’s coffin.

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Morning Snapshot: Gold jumps as sabers rattle

USAGOLD/Peter Grant/08-09-17

Gold jumped to new 8-week as geopolitical tensions between the U.S. and DPRK ratchet higher. Flight to safety positioning not only lifted gold, but U.S. Treasuries as well.

After “intelligence sources” told the Washington Post on Tuesday that North Korea had likely miniaturized a nuclear devise that could be fitted to a missile, President Trump responded by saying, “They will be met with fire and fury like the world has never seen.”

This morning, North Korea’s state-run news agency KCNA stated that the military is “examining the operational plan” to strike Andersen Air Force Base on the U.S. territory of Guam “to send a serious warning signal to the U.S.” That prompted a twitter response from the President:

With the sabers rattling ever-louder, gold has resumed its uptrend with focus back on the high for the year at 1296.06. A convincing move above this level would have rather bullish technical implications.

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Morning Snapshot: Gold firms as dollar comes under renewed pressure

USAGOLD/Peter Grant/08-08-17

Gold firmed overseas as the dollar came under renewed pressure. While price action for the yellow metal remains confined to last Friday’s range for now, the underlying technical and fundamental biases remain to the upside.

Softer stocks are providing an additional boost for gold, but here too, the trend remains unquestionably positive. Global shares are being weighed today by a more pronounced than expected slowdown in Chinese export growth, which is indeed cause for concern.

The NFIB Small Business Optimism Index rose to 105.2 in July. Chain store sales rose 2.4% in the week ended 05-Aug. JOLTS Job Openings for June and IBD/TIPP Economic Optimism Index for August come out later this morning. There is also a $45 bln 4-week bill auction and a $24 bln 3-year note auction.

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Morning Snapshot: Gold starts the week modestly lower

USAGOLD/Peter Grant/08-07-17

Gold starts the week modestly lower in the wake of Friday’s better than expected jobs report. However, the firm headlines numbers did nothing to alter market perceptions that the Fed is on pause through September.

The central bank’s primary concern is inflation, which remains illusive. With the Fed on hold, the downtrend in the dollar is likely to persist, which bodes well for the uptrend in gold.

The July Labor Market Conditions Index and June consumer credit come out later this morning. We’ll also hear FedSpeak from Bullard and KaskKari. Canadian markets are closed today in observance of Civic Holiday.

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Morning Snapshot: Gold corrects into the range

USAGOLD/Peter Grant/08-04-17

Gold has retreated into the recent range following this morning’s better than expected jobs report for July. The low for the week at 1256.50 remains protected at this point.

Nonfarm payrolls rose 209k in July, above expectations of +181k. June was adjusted higher as well to 231k. The unemployment rate edged lower to 4.3%. Hourly earnings rose 0.3%, in line with expectations.

That’s a good jobs report, but it does not improve the odds of a September rate hike. The anticipated pause in the Fed’s tightening cycle is based exclusively on the absence of inflation.

Nonetheless, gold posted solid gains over the previous 3-weeks and the dollar has fallen significantly. The jobs numbers is perhaps a good excuse to take some profits ahead of the weekend.

However, I suspect downticks in gold will attract buying interest, and upticks in the dollar will attract sellers. The fundamentals continue to favor the respective trends.

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Morning Snapshot: Gold firm as dollar losses pause

USAGOLD/Peter Grant/08-03-17

Gold continues to trade near the high end of the recent range. Even modest downticks have been attracting buying interest, which bodes well for additional gains.

Initial jobless claims fell 5k last week to 240k, in line with expectations. Later this morning, we’ll see factory orders for June and services PMI/ISM for July.

The BoE held steady on rates, in line with expectations, while downgrading both its growth and inflation outlooks. Sterling came under pressure as the market pushed back expectations of an initial rate hike.

Weakness in the pound may actually provide a little bit of support to the dollar. The dollar index is in fact consolidating in a narrow range after falling to a 14-month low yesterday. This year’s tumble in the dollar has provided a stiff tailwind for gold, which is expected to continue.

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Morning Snapshot: Gold firm as dollar remains weak, and stocks continue to gain

USAGOLD/Peter Grant/08-02-17

Gold starts the U.S. session slightly lower, but generally firm within the recent range. Persistent weakness in the dollar continues to underpin the yellow metal.

The ADP employment survey came in at 178k for July, below expectations of +182k. However, June was revised up to +191k, from +158k previously. Median expectations for July nonfarm payrolls are +182k. That critical report comes out on Friday.

Amid rising talk about the stock bubble, the DJIA reached 22,000 this morning. As we noted in yesterday’s DMR, former Fed Chairman Alan Greenspan says the real bubble is in the bond market. Former Fed insider Danielle DiMartino-Booth had a smart response to Greenspan’s contention:

The risks of a correction are arguably considerable. Gold may be garnering some support from investors hedging that growing risk.

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Morning Snapshot: Gold continues to consolidate near 6-week high set last week

USAGOLD/Peter Grant/08-01-17

Gold remains well bid, within striking distance of the 6-week high established last week at 1270.83. Fresh 6-week highs would return focus to the high for the year set in early-June at 1296.06.

June personal income disappointed, coming in unchanged, against expectations of +0.4%. May was revised lower to +0.3%. With incomes continuing to languish, it is not surprising that inflation pressures remain weak.

Personal consumption expenditures (PCE) rose a scant 0.1%, in line with expectations. Prices were unchanged, while prices excluding food and energy edged up 0.1%. Inflation remains elusive, which further solidifies expectations that the Fed is on hold for September.

Later this morning we’ll get manufacturing PMI and ISM, along with construction spending and domestic auto sales.

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Morning Snapshot: Gold remains well bid after solid gains over the previous 3-weeks

USAGOLD/Peter Grant/07-31-17

Gold remains well bid after gaining 1% last week, and more than 4% over the previous 3-weeks. A number of key technical levels have been exceeded in recent weeks, shifting focus to the 1296.06/1300.00 level.

The Fed blinked last week in the face of slowing inflation and persistent tepid growth. After a rather dovish FOMC statement, September rate hike prospects crashed to zero-percent. More recently, they edged back up to 1.4%, but I think we can call September off the table at this point.

While advance Q2 GDP met expectations last week, the negative revision to Q1 growth added further weight to those rate hike expectations and therefore the dollar. Ongoing weakness in the greenback should continue to provide a tailwind to the gold market.

Today’s U.S. calendar has July Chicago PMI, June pending home sales, June ag prices and the Dallas Fed index for July. PCE comes out tomorrow and will likely confirm inflation weakness seen in the advance GDP report. On Friday we’ll get the July jobs report. Expectations for nonfarm payrolls is +181k. The jobless rate is expected to tick down to 4.3%.

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Morning Snapshot: Gold jumps to new 6-week high as Q2 GDP disappoints

USAGOLD/Peter Grant/07-28-17

Gold jumped to a new 6-week high in the wake of this morning’s disappointing Q2 GDP data. The dollar has already retraced most of yesterday’s bounce, lending ongoing support to the yellow metal.

The advance Q2 GDP print was in line with expectations of 2.6%, but Q1 growth was revised back down to 1.2%. ECI rose 0.5%, below expectations of +0.6%, versus +0.8% in Q1.

Perhaps most importantly, core PCE rose just 0.9% in Q2, down from 1.8% in Q1. This is the Fed’s preferred measure of inflation, suggesting that the probability of a September rate hike is properly priced at zero. However, the stark decline is going to start raising doubts about December and the balance sheet unwind as well.

Now the question becomes; is this Q2 rebound in growth — albeit modest — even sustainable? A third of the way through Q3, the data have been less than impressive and let’s be honest, we’re way past due for a recession.

As economic uncertainty persists, gold will continue to attract safe-haven interest. If incoming data continues to disappoint, the yellow metal may really start to run.

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Morning Snapshot: Gold remains well bid, even with rebound in dollar

USAGOLD/Peter Grant/07-27-17

Gold continues to pressure the upside in the wake of yesterday’s solid gains. The yellow metal has edged to a new 6-week high today, and is maintaining those gains in the wake of the surge in June durable goods orders.

Durable good orders surged 6.5% in June, well above expectations of +2.8%. That was driven by transportation orders, which rose 19%. More specifically, non-defense aircraft and parts orders were up a whopping 131%.

While the headline number looks great, the ex-trans number was a much more modest +0.2%. Nobody thinks that impressive headline print puts a September rate hike back on the table.

Gold is is holding up nicely, even with the rebound in the dollar from new 13-month lows in earlier trading. The dollar index appears destined to challenge the four-plus year low at 91.92, set in May of last year. That weakness should continue to underpin the yellow metal.

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Morning Snapshot: Gold remains consolidative ahead of Fed decision

USAGOLD/Peter Grant/07-26-17

Gold continues to consolidate as markets await the FOMC’s latest decision on monetary policy. The policy statement comes out at 2:00ET.

It is widely expected that the Fed will hold steady on policy and provide no additional clues about the timing of balance sheet normalization. Prospects for a September rate hike remains a long-shot.

Economic data will be light today with just EIA crude stocks for last week and June new home sales. A rise to a 615k annual pace is anticipated for new home sales.

The dollar’s decline has taken a pause, but the trend remains unquestionably bearish. Should that downtrend resume, it will provide an ongoing tailwind for gold.

Peter Spina of GoldSeek told MarketWatch yesterday that “the dollar has crumbled while the price of gold has begun inching higher toward a price takeoff trigger that should shoot it higher by $200-$300 an ounce over the coming rest of the year.” While Spina doesn’t specify where that trigger is, I think it lies at 1296.06/1300.00.

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Morning Snapshot: Gold underpinned by continued dollar weakness

USAGOLD/Peter Grant/07-25-17

Gold has rebounded from modest overseas downticks to trade little-changed on the day, as the dollar continues its slide. The dollar index has fallen to fresh 13-month lows, making the 2½-year low at 91.91 look increasingly attractive.

Last week’s gains in gold returned considerable credence to the uptrend that has emerged so far this year. While there are several additional tiers of resistance above the market, dollar weakness should help keep gold underpinned.

The Fed’s 2-day FOMC meeting begins today and the policy statement will be released tomorrow at 2:00ET. The Fed is widely expected to hold steady on policy. While I think they will keep their cards close to the vest, the market will be looking for clues as to the likelihood of a September rate hike. Fed funds futures put the probability at just 8.2%.

Later this morning we’ll see Case-Shiller and FHFA home prices for May. More gains in both are expected. We’ll also get July consumer confidence and the Richmond Fed index. The former is expected to ease modestly, while the latter is expected to come in steady.

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Morning Snapshot: Gold continues to track higher

USAGOLD/Peter Grant/07-24-17

Gold begins the week much as it ended last week, pressuring the upside. The 5-week high at 1258.90 is under pressure this morning as the dollar continues to plumb new 13-month lows.

The yellow metal took out several important technical levels last week, which has returned considerable credence to the underlying uptrend. The next tiers of resistance we’re watching are 1260.96 and 1267.79.

June existing home sales and Markit PMI are out later this morning. Focus however this week is on the two-day FOMC meeting that begins tomorrow.

While the Fed is not expected to do anything at this meeting, the market will be hoping for some indication of their intentions for September. At this point, the market is pretty convinced that that the Fed is on pause through September.

At the end of this week, we’ll get the advance report on Q2 GDP. Expectations are running at +2.5%.

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Morning Snapshot: Gold pressures important resistance as dollar tumbles to 13-month lows

USAGOLD/Peter Grant/07-21-17

Gold has extended to the upside, slightly exceeding the important 1248.08/1250.13 resistance zone as the dollar continues to slide. A more definitive breach of this resistance area would return considerable credence to the underlying uptrend.

The dollar index has fallen to 13-month lows amid a growing certainty that a September rate hike is off the table, and rising doubts about December. The EUR-USD jumped to a 23-month high. That’s probably not what the ECB was expecting when they maintained their über-accommodative policy stance yesterday. Apparently they weren’t dovish enough . . .

As there is no U.S. data out today, I’ll take a moment to report Canadian CPI, which fell 0.1% in June. The annualized pace of consumer inflation slowed to 1.0%, versus 1.3% y/y in May. It seems our friends to the north are dealing with similar issues: a central bank that is raising interest rates into price weakness.

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Morning Snapshot: Gold rebounds yet again from intraday downticks

USAGOLD/Peter Grant/07-20-17

Gold has once again rebounded from modest overseas downticks to keep the pressure on the upside. The dollar gave back earlier gains, keeping focus on the downside, which bodes well for the yellow metal.

The ECB held steady on policy today, as was widely expected. More importantly perhaps, there was no hint of QE tapering in the policy statement. That initially pushed bund yields and the euro lower, but those losses could not be sustained as Mario Draghi began to speak. Despite his foot still being on the monetary gas pedal, he remains optimistic about the European economy. While Draghi claims tapering scenarios are not being discussed, markets appear to be expecting to hear something on that front come September.

On gold we’re still eying resistance at 1248/1250. A push through this zone would return considerable confidence to the uptrend that has dominated this year.

Initial jobless claims fell more than expected last week to 5-month lows. The Philly Fed index tumbled to 19.5 in July, below expectations of 22.5, versus 27.6 in June.

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Morning Snapshot: Gold rebounds from overseas downticks

USAGOLD/Peter Grant/07-19-17

Gold corrected modestly in overseas trading, but is now back in positive territory, pressuring yesterday’s high. Amid ongoing dollar weakness and political uncertainty, the bias for the yellow metal is to the upside.

Housing starts in June rebounded more than expected, which seems like the first bit of good economic news we’ve seen in a awhile. However, the trend is pretty flat and home builder confidence has tumbled recently.

The dollar remains defensive in the wake of recent weakness in inflation data, which has caused the deterioration of September rate hike expectations. In an article today, Jim Richards contends that the Fed has already raised the white flag and is unlikely to hike rates again before December.

As that realities sinks in, the dollar will likely slip further, adding further buoyancy to the yellow metal. The 1248/1250 technical resistance zone is the next hurdle to clear.

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Morning Snapshot: Gold extends gains on more weak inflation data, falling dollar

USAGOLD/Peter Grant/07-18-17

Gold is climbing for a third consecutive session, with the dollar remaining under broad pressure. More weak inflation data further erodes September rate hike expectations adding additional weight to the greenback.

Both U.S. import and export prices fell in June, missing expectations. That drove the dollar index to pressure 11-month lows at 94.46.

Recent gains in the yellow metal suggest that those that were long gold in anticipation of inflation — the so-called Trumo reflation trade — have likely exited the market. The buyers now are probably those with the mindset that realize the Fed was never going to get the inflation they desired with the dollar at 14-year highs.

Not only are there mounting expectations that the Fed will pause, but once again there are rumblings that they may have to reverse course. At this point, the Fed has only half the 300 bps they historically need to deal with a recession. That is, unless they go negative.

It looks like the latest iteration of the GOP’s healthcare bill is dead in the water, without the votes to clear the Senate. That does not bode well for the broader Trump agenda. Without any help on the fiscal side, the onus falls on monetary policy once again to underpin the economy.

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Morning Snapshot: Gold moves back above 200-day moving average

USAGOLD/Peter Grant/07-17-17

Gold extended to the upside in overseas trading after posting solid gains on Friday. That puts the yellow metal convincingly back above its 200-day moving average.

Gold is being supported by diminished September rate hike expectations in the wake of recent weak data, which is pressuring both yields and the dollar. This morning’s plunge in the Empire State Index adds to the feeling that the economy may be stalling-out.

Further weakness in prices is expected to be revealed in June import and export prices tomorrow. On the heels of soft PPI and CPI data last week, hope for targeted 2% inflation seems to be evaporating.

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Morning Snapshot: Gold surges as weak data further erodes rate hike prospects

USAGOLD/Peter Grant/07-14-17

Gold is rebounding following more disappointing U.S. data. The dollar is plumbing the recent lows as September rate hike expectations have deteriorated further.

Resistance defined by the 1229.37/63 zone is under pressure. If gold breaks through this first tier of resistance, focus would shift to the halfway back point of the decline from just in front of $1300.

U.S. CPI came in unchanged in June, below expectations of +0.1%. The annualized rate slowed to 1.6%, down from 1.9% in May. Core CPI was +0.1% in June, on expectations of +0.2%. Zerohedge reports that this was the fourth consecutive monthly miss on CPI with consumer inflation at the lowest level since January 2015.

Adding insult to injury, June retail sales fell 0.2%, below expectations of +0.1%. Ex-auto also came in at -0.2%, on expectations of +0.2%. This is likely to result in further downgrades to Q2 GDP expectations.

The Fed may continue trying to convince us that this weakness is “transitory,” but markets are clearly starting to have their doubts. If the Fed is truly data dependent, I think a September rate hike is off the table. A hike in December will become increasingly dubious.

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Morning Snapshot: Gold edges higher as PPI inflation slows further

USAGOLD/Peter Grant/07-13-17

Gold is slightly higher, buoyed by a softer dollar and further confirmation that inflationary pressures are on the wane. The yellow metal still needs to clear nearby resistance at 1229.37 to ease pressure on the downside.

Headline and core PPI edged up just 0.1% each in June. Annualized PPI slowed to +2.0%, down from 2.4% in May. Core CPI fell to 1.9% y/y, versus 2.1% y/y in May.

Looking ahead to tomorrow’s CPI report, more bad news on the inflation front seems likely. Hence, it should come as no surprise that Fed chair Yellen made note of “risks around the inflation outlook” in her testimony yesterday.

“We’re watching this very closely and stand ready to adjust our policy if it appears the inflation undershoot appears consistent,” said Yellen. And yet, there seems to be some expectation that she will walk back that dovishness somewhat when she testifies today. That perhaps becomes somewhat harder in light of the PPI data.

If CPI data misses expectations, further erosion of September rate hike expectations would be likely. Those prospects are presently 13.3%; effectively off the table, at least in the minds of the markets.

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