Category: Gold News

The Daily Market Report: Gold Rises, Despite Surging Stocks


USAGOLD/Peter Grant/12-18-17

Gold is up, having established a 7-session high at 1263.97. A breach of minor chart resistance at 1264.10 would favor a short-term challenge of the 200-day moving average 1268.83.

This is a critical week for the GOP and the Trump administration. Tax reform is expected to be voted on early this week with the plan to deliver the bill to the President’s desk before the Christmas recess. However, the budget and debt ceiling issue has to be dealt with before December 22 as well.

A partial government shutdown may hang in the balance, although neither party seems inclined to press the issue. Consequently, we may see that can get kicked into the new year.

One thing is certain, the debt ceiling is going to have to rise. The tax bill is expected to add the maximum $1.5 trillion to the national debt over the next decade. However, that may be conservative based on perhaps too optimistic growth projections.

With the Fed both raising rates and tapering their balance sheet, the cost of financing the massive and growing debt are likely to rise as well. That is going to provide an additional headwind to those growth prospects.

Consumer debt exceeded the $1 trillion milestone earlier this year, but MarketWatch contends more consumer debt is “One sure-fire prediction for 2018.” Perhaps not surprisingly, delinquencies are expected to rise in the year ahead as well. This is another significant impediment to growth.

Despite the risks, stocks love the prospects for tax cuts. However, I’m wondering if this will end up being a classic case of ‘buy the rumor, sell the fact.’ Yale economist Stephen Roach cautions that “the CAPE ratio has been higher than it is today only twice in its 135-plus year history – in 1929 and in 2000. Those are not comforting precedents.”

The implication of course it that stocks are really overvalued and we know what happened in 1929 and 2000. A little portfolio balancing into year-end, seems like a prudent strategy.

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Gold extends rally as dollar wobbles, but stock gains keep metal in check


MarketWatch/Rachel Koning Beals/12-18-17

Gold futures ticked higher Monday as the dollar index slipped, building slowly on what was the yellow metal’s first weekly gain in a month last week.

…The dollar slipped against most other major currencies, with the ICE Dollar Index DXY, -0.56% down 0.3% at 93.70. The greenback advanced on Friday on increased optimism the Republican tax bill will get approved before Christmas. Gold typically moves inversely to the dollar and stocks, as investor appetite for riskier assets tends to lure investors away from the haven of gold.

Accordingly, gold’s upside Monday was held in check in part as risk-on investment sentiment persisted, leaving major stock indexes on track for new records. Such optimism was the result of tax-policy progress. Speaking on several Sunday talk shows, Treasury Secretary Steven Mnuchin said he has “no doubt” that the GOP’s tax bill will make it to the desk of President Donald Trump this week.

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Gold ticks higher as nerves over U.S. tax bill hit dollar

Reuters/Eric Onstad/12-18-17

Gold edged higher on Monday as uncertainty over U.S. tax reform weighed on the dollar, while an analyst said bullion may face renewed headwinds early next year.

…”If the whole thing (tax reform) falls apart at the last minute, it would be hugely positive for gold, but I think that is unlikely,” said analyst Carsten Menke at Julius Baer in Zurich.

If the tax bill passes, gold might dip slightly, but that scenario is largely priced in the market, he added.

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Morning Snapshot: Gold Firms As Congress Pushes to Pass Tax Deal, Faces Shutdown

USAGOLD/Peter Grant/12-18-17

Gold is up in early U.S. trading, buoyed by a weaker dollar. The rise in the yellow metal comes despite continued gains in shares and firmer yields, as cyclical forces seem to have taken hold.

The stock market is eagerly anticipating final passage of the GOP tax bill early this week, despite swirling doubts about the positive economic impact of the legislation and a certainty that the debt level is going to rise. Congress also needs to pass a budget agreement and address the debt ceiling this week, or face a partial government shutdown.

While the tax bill can get passed without any support from Democrats, the budget/debt ceiling agreement is going to require at least a little bipartisanship. The more likely scenario is that they kick-the-can yet again with another short-term deal.

Silver is back above $16, but remains comparatively soft. However, there is a growing recognition that silver is quite undervalued relative to gold. Kitco reported late last week that “both TD Securities and Bank of Montreal came out and said that they see silver prices pushing to $20 an ounce next year.”

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The Daily Market Report: Gold Poised for First Weekly Gain in Four


USAGOLD/Peter Grant/12-15-17

Gold is up modestly, having given back more significant gains seen earlier in the session. However, the yellow metal still appears to be on track for its first weekly gain in the last four.

News that some last-minute concessions were being made on the tax bill to win the support of GOP holdouts, helped the dollar recover intraday, knocking gold off the highs for the week.

The final version of the tax bill is expected to be made public later today. Given that the plan is not terribly popular with the general public, perhaps it’s not surprising that it will drop late on a Friday. Congress would then likely vote next week and get the bill to the President before the Christmas recess.

Congress is also going to have to come up with another temporary spending measure and kick the can on the debt ceiling on or before December 22 as well. The tax bill is expected to add the maximum $1.5 trillion to the national debt over the next 10-years.

However, it may prove to be much more than that if tax cuts fail to spark the fast growth that proponents are anticipating. As noted in this morning’s Snapshot, the Fed’s economic forecasts that came out earlier in the week, reflect some serious doubts.

While the central bank now projects 2.5% GDP in 2018, they see the pace of growth moderating to 2.1% in 2019 and 2.0% in 2020. The Fed kept their long-term growth forecast steady at 1.8%.

The Fed definitely tends to be pretty optimistic on their forecasts. However, their forecasts suggest they see the fiscal impact of the first major tax overhaul in more than 30-years as negligible and short-lived.

Without any significant and sustainable fiscal stimulus, the onus is going to fall right back on the Fed to support growth with easier monetary policy. In other words, the tightening cycle that began a year ago may have to be paused again, or perhaps even reversed.

That realization would weigh on the dollar, boosting gold in the process. The yellow metal needs to climb back above the 200-day moving average (presently around 1268.52) in order to ease near-term pressure on the downside. At that point, renewed tests above $1300 would become likely.

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Gold edges up as dollar slips on U.S. tax bill worries


Reuters/Apeksha Nair/12-15-17

Gold edged higher in Asian trade on Friday, heading for their first weekly gain in four, as the dollar sagged on concerns about the progress of U.S. tax reform.

“The U.S. dollar is weakening a little and that’s benefiting gold,” said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

…President Donald Trump’s efforts to win passage of a sweeping tax bill in the U.S. Congress hit potential obstacles when two more Republican senators insisted on changes, joining a list of lawmakers whose support is uncertain.

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Morning Snapshot: Gold Recovery Continues

USAGOLD/Peter Grant/12-15-17

Gold is up in early U.S. trading, buoyed by a softer dollar and appears poised to record its first weekly gain in the last four. This is a good initial indication that the pattern that has emerged in recent years, where gold bottoms late in the year and rallies into the new year, is set to repeat.

Fresh doubts about whether the reconciled tax bill has the votes to clear Congress is stoking political uncertainty. While the Fed now sees GDP rising to 2.5% in 2018, they see it tapering again to 2.0% by 2020. The long range forecast remains steady at 1.8%, raising doubts that the tax bill will “pay for itself.” as the backers claim.

The GOP is trying to get the legislation passed before the new Democrat Senator from Alabama can get seated, which would further narrow the already razor thin advantage Republicans holds in the upper chamber. If the tax measure fails to get to the President’s desk by year-end, stocks would likely reverse, which would push gold back toward $1300.

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The Daily Market Report: Gold Maintains Post-FOMC Gains


USAGOLD/Peter Grant/12-14-17

Gold extended to new highs for the week in overseas trading, but has since been consolidating the solid gains seen after the Fed’s policy decision yesterday. Silver on the other hand, was unable to sustain the rebound above $16.

Today’s generally better than expected U.S. economic data and steady policy from both the BoE and ECB are providing some support for the dollar, which is a bit of a headwind for gold. With the Fed raising rates and the other major central banks still on hold, the divergence will tend to favor the dollar.

That being said, the Fed’s continued concern about low inflation and slow wage growth may temper tightening expectations if those conditions persist into the new year. As noted yesterday, at some point the central bank is going to have to give up on the notion that the situation is “transitory.”

The World Gold Council’s investor report focuses on Germany, but this paragraph in introduction is a nice thumbnail sketch for the gold market at this point:

Looking ahead to 2018, there are good reasons to be optimistic about gold’s performance. US interest rates may be rising but a lot is priced into the curve already and the direction of the dollar remains uncertain. Meanwhile, the long bull market in equities raises serious questions about prospects for stock prices. — Aram Shishmanian, CEO World Gold Council

That fits nicely with the seasonal patter that has emerged in recent years, where gold has bottomed around the time of the December FOMC meeting and rallied into the new year. Yesterday’s initial post-FOMC rally is encouraging, but some upside follow through is needed to further bolster confidence in the upside.

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Here’s Your Reason To Believe Gold Is Heading Higher – WGC Report

KitcoNews/Daniela Cambone/12-14-17

Despite rising interest rates, a strong U.S. dollar and a persistent bull market in equities, gold managed to defeat the odds this year.

The yellow metal, up close to 9% this year, was the shining star of the glum commodities space.

For John Reade, chief market strategist for the World Gold Council (WGC) – there are several reasons why gold will continue to have an upward trajectory in 2018.

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Gold Investor, December 2017


World Gold Council/12-14-17

To say that the global financial crisis had a seismic effect on markets is almost a truism. But the events of 2008 reshaped investor behaviour too, not least in Germany.

As a nation which values long-term wealth preservation, Germany has a long tradition of gold investment. Around the turn of the century however, German investors discovered a new-found fascination for equities and interest in gold waned. Banks, historic distributors of physical assets, closed down or minimised their gold desks and investment demand fell to generational lows.

The financial crisis transformed that mindset, reminding German investors of the properties that had attracted them to gold in the past – its resilience in the face of disaster; its lack of correlation with other assets; its immunity from credit risk; and above all, its reliability as a wealth generation tool.

Since that time, the German gold market has gone from strength to strength, boosted by a rich ecosphere that facilitates gold investment online, in stores, at banks and via ETFs.

In this edition of Gold Investor, we explore Germany’s relationship with gold, showcasing that, when conditions are right, a gold market can experience rapid development, to the benefit of stakeholders across the value chain.

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Gold edges back from one-week high after strong U.S. data

Reuters/Eric Onstad/12-14-17

Gold pulled back from a one-week high on Thursday after the dollar rebounded following strong U.S. retail sales data.

U.S. retail sales increased more than expected in November as the holiday shopping season got off to a brisk start.

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Morning Snapshot: Gold Eases After BoE and ECB Hold Steady on Policy

USAGOLD/Peter Grant/12-14-17

Gold is down slightly in early U.S. trading. The yellow metal is mostly maintaining yesterday’s post-FOMC gains, but the corresponding retreat in the dollar seems to have stalled following this morning’s round of generally favorable economic data.

Initial jobless claims for last week were lower than expected. November retail sales were in line, but ex-auto beat expectations. Import and export prices were hotter than anticipated as well.

While the data seem to support Fed guidance for another 3 or 4 rate hikes in 2018, periods of data inspired optimism have tended to be fleeting. As noted yesterday, there is still cause for concern on the wage and inflation fronts.

Both the BoE and ECB held steady on policy today, and this divergence with the Fed is likely to provide some underpinning for the dollar. That in turn presents a bit of a headwind for gold.

However, seasonal pressures that have been evident in recent years, provide a potentially countervailing tailwind. If the pattern repeats of course.

Silver was able to regain $16 after the Fed announcement yesterday, but those gains have proven unsustainable thus far. Silver is back below $16 and most of the pullback in the gold/silver ratio from yesterday has already been retraced. Silver remains very undervalued, presenting an intriguing value proposition.

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Daily Market Report: Gold Jumps Following Fed Decision


USAGOLD/Peter Grant/12-13-17

Gold jumped more than 1% on Wednseday, after the Fed did exactly what everyone was expecting. Silver surged more than 2%, reclaiming the $16 level for the first time this week.

The Fed raised interest rates by 25 bps and guidance for next year suggests they remain on track for at least three more hikes. However, both Chicago Fed President Charles Evans and Minneapolis Fed President Neel Kashkari dissented.

That dovish dissent may serve to temper market expectations for further tightening of policy in 2018. While Fed claims to be optimistic on growth and employment, expectations for subdued inflation, wage growth and productivity persist: Even with fiscal stimulus from tax cuts being taken into consideration.

While the GDP projections for the coming years were edged up, growth over the next two-years of 2.5% seems to mark the high point of expectations. The outlook drops to 2.0% by 2020 and the long-range forecast remains at 1.8%. Huh, is that really “optimistic”?

At any rate, the dollar retreated after the policy release, providing some buoyancy to precious metals. We’ll see if there’s some upside follow-through into the new year, as has been the pattern in recent years.

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Gold up more than $10 and silver has regained the 16-handle following Fed policy statement.

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Gold holds near 5-month low ahead of Fed meeting outcome

Reuters/Apeksha Nair/12-13-17

Gold steadied near its weakest level in almost five months on Wednesday amid expectations the Federal Reserve would raise interest rates again at the conclusion of its last policy meeting this year.

The Fed has increased rates twice in 2017 and is still expected to push through three more hikes next year.

…”It’s just consolidating here at the moment until the Federal Open Market Committee statement is out. We’re expecting a rate hike,” the trader said, on gold’s behavior in Asian trading.

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Morning Snapshot: Gold Stabilizes Ahead of Fed Decision

USAGOLD/Peter Grant/12-13-17

Gold is up slightly as the market eagerly awaits the Fed policy decision later today. The yellow metal remains generally on defense, having set a 5-month low yesterday at 1235.90. We’ll see if the December FOMC meeting closely corresponds with a market low for a third consecutive year.

The Fed is widely expected to announce a 25 bps rate hike at 2:00ET today. Focus will be on the forward guidance within the statement and dot-plots, as well as what is likely to be Janet Yellen’s final presser as chair.

Headline CPI met expectations at +0.4% in November, pushing the annualized pace of consumer inflation up to 2.2%. However, core inflation rose just 0.1% m/m and the annualized pace slowed to 1.7%.

There doesn’t seem to be cause for much optimism on the wage or inflation front. I mean, you can only cry “transitory” for so long before you need to acknowledge something structural might be occurring. One really only need look at Japan’s experience over the last 30-years to perhaps get an inkling of what’s in store. Certainly tighter monetary policy is not going to help the cause.

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Gold Down But Not Out; Analysts Seek Buying Opportunities

KitcoNews/Neils Christensen/12-12-17

Gold’s downtrend is entering its seventh day as prices have broken below another key support level, but analysts say that lower prices could provide a significant buying opportunity.

…Bill Baruch, president of Blue Line Futures, noted that gold seasonally bottomed in the second half of December only to finish higher by the end of January in nine out of the last 12 years.

“We believe the best place to buy would be in front of $1,225,” he said. “Ultimately, we are looking for a bottoming setup to buy gold and stay long into and through January.”

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The Daily Market Report: Gold Weighed As Fed Meets and Dollar Rises


USAGOLD/Peter Grant/12-12-17

Gold’s annual slide ahead of the December FOMC decision continues, with a new 5-month low established at 1235.90. The dollar index has edged to a new 4-week high in anticipation of a rate hike tomorrow and perhaps more hawkish guidance for 2018.

However, there is another camp that believes weak wage growth and inflation continue to warrant a note of caution on the part of the Fed. These were the precise reasons the central bank opted to pause the tightening cycle back in September, and neither condition has materially improved in the intervening months.

Before the policy statement is released, the market will get a look at November CPI. While an uptick in the annualized pace of headline consumer inflation is anticipated, core inflation is expected to remain stagnant.

Congressional Republicans are reportedly closing in on a reconciled tax bill. There’s very little margin for error here, as the Republicans can’t really afford to lose more than one vote in the Senate.

One thing seems certain, the legislation will add $1.5 trillion to the debt over the next decade, the maximum allowed. It will likely be quite a bit more, especially if the long-overdue recession strikes at some point during the next 10-years.

Then Congress only has until December 22 to pass a budget and raise or suspend the debt ceiling. Or of course, they could always kick the can again.

Which brings us full-circle back to the Fed. Rising debt and tighter policy — via higher rates and so-called “normilization” of the Fed’s balance sheet — creates a significant headwind for growth. The Fed could end up triggering that overdue recession.

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If Fed Signals Weak Inflation, Gold Could Move Back Up To $1,300 — TD Securities

KitcoNews/Anna Golubova/12-11/17

After another disappointing trading session, one bank sees gold ending the week on a positive note, with prices possibly moving up to $1,300 an ounce if the Federal Reserve hints at weak inflation on Wednesday.

“Should inflation disappoint or the Fed communicate some caution with regards to the persistence in weak inflation, the yield curve’s flattening could play a big role in sending gold prices back to the $1,260-$1,300/oz range,” said head of commodity strategy at TD Securities Bart Melek in a report published on Monday.

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Morning Snapshot: Gold Slides to 5-Month Low As FOMC Meets

USAGOLD/Peter Grant/12-12-17

Gold is down slightly in early U.S. trading, having eked out a new 5-month low at 1238.90. Gold continues to be pressured by a stronger dollar as the Fed begins their 2-day FOMC meeting.

A 25 bps rate hike is fully expected when the Fed announces policy tomorrow. Dollar and yield strength seems to reflect growing expectations of more hawkish guidance for 2018.

Headline PPI rose 0.4% in November, pushing the annualized rate to producer inflation to a 6-year high of 3.1%. However, core PPI remained steady at +2.4% y/y, despite a higher than expected m/m rise of +0.3%.

November CPI comes out tomorrow in advance of the Fed’s announcement. Headline CPI is expected to rise to a 2.2% annualized pace, while core CPI is anticipated to hold steady at +1.8%.

Along with the Fed decision tomorrow, we’ll get the central bank’s economic forecasts and Chair Yellen will hold a press conference. We’ll see how optimistic the Fed is about wage and price growth in the year ahead.

Silver remains under pressure as well, also edging to new 5-month lows with the breach of last week’s low at 15.62. Silver is pretty oversold at this point, but $16 must be regained to ease pressure on the downside.

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GOLDMAN SACHS: Bitcoin hasn’t taken a bite out of demand for gold

BusinessInsider/Will Martin/12-12-17

The surging price of bitcoin has not put investors off buying gold, with “no evidence of a mass exodus” from the safe haven metal despite a drop in prices recently, according to research released by Goldman Sachs this week.

Jeffrey Currie, Goldman’s global head of commodities research, said that the groups of investors looking to invest in the two assets are vastly different, therefore protecting gold demand, he wrote in a note to clients reported by the Financial Times.

…”We believe the composition of demand between bitcoin and gold is the key difference in the recent price action. In our view bitcoin is attracting more speculative inflows relative to gold.”

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Could gold do a bitcoin and hit $10,000 an ounce in 2018?

The National/Peter Cooper/12-10-17

After bitcoin’s spectacular price spike this year, could gold be about to stage a similar grand finale to its bull market that began back in 2000?

Bitcoin also took many years before its final speculative reach-for-the-sky. Indeed, the scramble to buy at the last minute has been reminiscent of gold’s previous price spike back in 1980 after a long run up in prices during the economically unstable 1970s.

There are certainly goldbugs who argue for $10,000 an ounce convincingly. Ex-CIA macroeconomic adviser Jim Rickards’ latest tome, The New Case for Gold explains how gold will again be needed as a linchpin of the global economy.

PG View: That price target seems pretty optimistic, but given the rise in BitCoin this year, why couldn’t a real tangible asset make a similar jump?

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The Daily Market Report: Gold Remains Defensive Ahead of This Week’s FOMC Meeting


USAGOLD/Peter Grant/12-11-17

Gold is down, pressuring the 4+ month low established last week, as focus shifts to this week’s FOMC meeting. The Fed will announce policy on Wednesday and it is widely expected that they will raise rates by 25 bps, despite still moribund wages and inflation.

However, the last two December rate hikes (2015 and 2016) closely corresponded with significant lows in the price of gold. The market could be setting up for a similar event this time around, but in 2017 gold has been comparatively buoyant ahead of year end.

David Fickling, writing for Bloomberg, notes the distinct seasonal trend that has emerged over the past decade. “Whatever the reason, it’s enough of a consistent pattern these days that it’s starting to become a self-fulfilling prophecy,” says Fickling.

[G]old exhibits a pronounced seasonality. January, February, July and August — the four months this year when the metal has rallied most strongly — had, on average, been the best months to buy gold over the previous 10 years.

In 2016 and 2015, the lows actually occurred in December. “If history is still reliable, January will be a great month to own precious metals,”said John Rubino in a separate note for Sprott Money.

With BitCoin futures now trading on the CBOE, many are arguing that the meteoric rise of the cryptocurrency is stealing gold’s thunder. This is happening at the same time that many are warning BitCoin has become the biggest bubble since the Tulip-Mania of 1636-1637.

Have precious metals suddenly lost their luster – has their 10,000 year history as a store of value suddenly evaporated within the matter of a month? Of course not. This is absurd and ludicrous and sounds like a copy and pasted line from any MSM financial outlet. — Nathan McDonald, Sprott Money News

Certainly BitCoin has been stealing headlines this year, but how long can this last. Clearly longer than many first thought, but with each push to new highs, it arguably becomes increasingly unstable.

That tweet outlines some very serious concerns. One that is not mentioned, is that to this day, nobody even knows who the creator of BitCoin is in reality. Investing — or perhaps more appropriately speculating — in an asset where that critical piece of knowledge is missing seems crazy to many.

Nonetheless, it’s just one of many oddities that have emerged since the financial crisis that seem to have little grounding in economic reality. That of course doesn’t preclude further gains, but like the price, the risks seem astronomic as well.

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Gold’s Time Is Nigh


Bloomberg/David Fickling/12-11-17

Remember gold?

It seems like only six years ago the shiny metal was flavor of the month, hitting a record $1,900 a troy ounce while its backers prophesied the end of the fiat money system.

With bitcoin sucking up all the crazy in financial markets, gold looks to have lost its luster. The CBOE/Comex Gold Volatility Index, a rough proxy for the amount of fun and profit available for precious metal traders, touched a record low of 10.17 last month, from levels north of 37 back in 2011.

That may be overdue a change. Despite suffering its worst week since May last week, the outlook for gold could be stronger now than it has been for several months.

January, February, July and August — the four months this year when the metal has rallied most strongly — had, on average, been the best months to buy gold over the previous 10 years.

PG View: Certainly gold and silver are undervalued relative to other asset classes. Now may a good time to diversify; take a little off the table in stocks for example and buy some real assets.

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Gold steadies below $1,250/oz ahead of Fed meeting

Reuters/Jan Harvey/12-11-17

Gold steadied below $1,250 an ounce on Monday after its biggest weekly drop in more than six months, with moves muted ahead of an expected interest rate hike from the U.S. Federal Reserve this week.

…The Fed is widely tipped to lift rates at its two-day policy meeting ending Wednesday, but its accompanying statement will be closely watched for any surprises.

The bank is expected to increase rates another two or three times in 2018, but still-sluggish inflation and wage growth has raised question marks over that view.

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Morning Snapshot: Gold Trading Near Unchanged from Friday’s Close

USAGOLD/Peter Grant/12-11-17

Gold is trading near unchanged in early New York trading after overseas uptick faded. The yellow metal remains defensive near the 4-month plus lows that were set last week as markets await the Fed decision on Wednesday this week, with a softer dollar offering some support.

The Fed is widely expected to hike interest rates by 25 bps, despite persistently soft earnings and inflation. Fed funds futures continue to put the probability of a hike in excess of 90%.

Today’s calendar is light with JOLTS job openings for October and 3- and 10-year auctions. November PPI and CPI come out on Tuesday and Wednesday respectively. Headline numbers are expected to edge higher, while core readings are likely to remain sluggish.

Silver is down modestly and remains on the ropes below $16 after posting a third consecutive weekly decline. With the gold/silver ratio elevated above 79, silver is arguably quite undervalued. A move back above $16 would ease short-term pressure on the downside.

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Morning Snapshot: Gold Up Modestly Post-NFP

USAGOLD/Peter Grant/12-08-17

Gold remains defensive at the low-end of yesterday’s range. The yellow metal continues to be weighed by a firmer dollar and heightened risk appetite.

The greenback has risen more than 1% this week on expectations that the Fed will come off “pause” next week and hike the Fed funds rate by 25 bps. The current ‘risk-on’ environment is keeping focus on stocks and bitcoin.

Today’s better than expected nonfarm payrolls number lends credence to the anticipated rate hike. However, there continues to be reason for concern in the earnings data.

Nonfarm payrolls rose 228k in November, above expectations of +198k, versus a negative revised +244k in October (was +261k). The unemployment rate steady at 4.1%, as expected.

Hourly earnings rose 0.2%, below expectations of +0.3%, versus a negative revised -0.1% (was unch) in October. That does not bode well for an imminent end to this allegedly “transitory” period of low inflation.

Congress passed a stopgap spending measure late yesterday, which will keep the government funded for an additional two-weeks until December 22. A kick of the can, albeit a short one.

Silver remains defensive below $16, but is trading slightly higher this morning. The gold/silver ratio reached a high of 79.53 yesterday, suggesting that silver is very undervalued relative to gold. A rebound above $16 is needed to ease short-term pressure on the downside.

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The Daily Market Report: Gold Falls to 4-Month Lows On Heightened Risk Appetite


USAGOLD/Peter Grant/12-07-17

Gold remains under pressure after dropping through the low end of the range in overseas trading. The yellow metal is being weighed by elevated risk appetite and a firmer dollar.

The market is optimistic that some deal will be struck this week to avert a government shutdown. While House Minority Leader Nancy Pelosi declared that Democrats would not support today’s stopgap spending bill, GOP leaders say they have the votes to kick the can for two more weeks.

If a partial government shutdown is temporarily averted, there will be a full-court press by the GOP to reconcile the House and Senate tax bills and get something to the President’s desk by Christmas. While there is some concern about the increase in deficits surrounding tax reform, the market seems to be focused solely on wider profit margins for corporations.

The market is also expecting a decent NFP print tomorrow (+198k median), which will further reinforce expectations for a 25 bps rate hike next week. While inflation and wage growth continues to disappoint — and these were the primary concerns that prompted the September pause — the Fed may ‘bet on the come’ regarding tax cuts, hoping they provide some level of long-awaited fiscal stimulus.

It is worth remembering that gold has rebounded smartly after the previous two December rate hikes. What’s different this year is that gold has been relatively buoyant ahead of the December policy decision, as compared to previous years.

Weakness in the broader commodities complex, attributed to concern about slowing growth in China, may also be playing a role in the recent pressure on gold. Pretty much every commodity fund/index/ETF has a gold component and when these are sold, gold is sold as well.

However, softer commodities portend broader economic weakness and the likelihood that below target inflation will persist. This could end up warranting more dovish central bank policies that one might associate with weaker currencies and a higher gold price.

Offering an underpinning to the gold market are heightened geopolitical tensions. North Korea has said that war is inevitable. Meanwhile, the Trump administrations decision to move the U.S. embassy to Jerusalem has sparked heightened unrest in the middle east.

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Gold slides to 4-month low as dollar edges up

Reuters/Apeksha Nair/12-07-17

Gold prices dropped to their lowest level in four months on Thursday as the dollar rose underpinned by optimism surrounding tax reform in the United States.

…The dollar on Thursday inched up against its peers, as optimism over U.S. lawmakers making progress on tax legislation continued to grow.

Hopes that U.S. tax reforms would boost economic growth have dented demand for safe-haven assets such as gold.

…INTL FCStone analyst Edward Meir said gold could move slightly lower heading into next week’s Federal Reserve meeting as investors would be jittery about the Fed’s policy wording going forward.

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Morning Snapshot: Gold Drops to 4-Month Lows

USAGOLD/Peter Grant/12-07-17

Gold is down in early U.S. trading, having definitively breached the low end of the range at 1260.10 overseas. That puts the yellow metal at a 4-month low amid a firmer dollar and ongoing optimism that a tax bill will get to the President’s desk before year-end.

Tomorrow is the deadline for at least a temporary spending measure to avert a government shut down. Congressional leaders are slated to meet with President Trump at the White House today in a last ditch effort to kick this can once again.

Then the Fed will make their final policy decision of the year next week. There is plenty of evidence to suggest they should remain on pause, but the market remains convinced that a 25 bps rate hike is in the cards.

U.S. initial jobless claims fell 2k to 236k in the week ended 02-Dec, below expectations of 240k. Later this morning we’ll get October Consumer Credit and M2 for last week.

Tomorrow is jobs Friday. Nonfarm payrolls are expected to rise by 198k. The jobless rate is expected to hold steady at 4.1%.

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