USAGOLD/Peter A. Grant/03-29-17
Gold continues to consolidate Monday’s solid gains, but the high for the year from February at 1263.87 remains intact. The trend remains favorable however, making further tests of the upside likely.
Both gold and silver are showing good resilience in the face of today’s good economic data and hawkish FedSpeak, which has served to lift the dollar. However, stocks remain well off their recent highs amid ongoing political uncertainty and perhaps the hawkish FedSpeak.
As we mentioned earlier this week, silver in fact may be the harbinger for further tests of the upside for both metals. The corresponding February high in the silver market is 18.48. While we’re still waiting for a cross of the 200-day moving average in gold, silver crossed that barrier on Monday and continues to sustain those gains.
Boston Fed hawk Rosengren, while a nonvoter, said that he would favor a rate hike at every other meeting this year. That would make a total of 4 hikes for 2017, which is more hawkish than the consensus. San Francistco Fed moderate dove John Williams (also a nonvoter) said he would not rule out more than 3 hikes. Chicago Fed dove Charles Evans took a more measured approach of 1 or 2 more hikes; expressing ongoing concerns about long-term inflation expectations.
The dollar firmed somewhat, with an additional boost from Brexit related Sterling weakness. The UK officially triggered Article 50 today, meaning that Brexit will proceed. The NASDAQ article I posted earlier today contends that gold will be a beneficiary of Brexit. The author sees gold as a currency and believes that some of the flows out of Sterling and the euro will find their way into gold. Given the relative size of the gold market to the $5 trillion average daily volume in the FX market, even a little shift could have a dramatic impact on the yellow metal.