Category: Gold Views

The Daily Market Report: Gold Retreats Into Lower Half of Range


USAGOLD/Peter Grant/11-30-17

Gold is down today, slipping to a two-week low within the well defined range. The yellow metal is being weighed by building optimism that tax reform is going to get passed, which has pushed stocks to record highs.

However, the stock market seems to be largely ignoring the very small window to get the Senate and House tax bills reconciled ahead of year-end. There also is the impending threat of a government shutdown at the end of next week, as well as the growing threat of war between the U.S. and North Korea.

Efforts to kick the can on the budget and debt ceiling are already underway. A stop-gap spending bill in the House would keep the government funded through December 22. That would reportedly be followed by a second temporary measure to get the government to the end of January.

One thing is certain, regardless of the outcome on the tax plan, the debt ceiling is going to have to be raised or suspended and the inevitable march higher will continue. That raises the question, who is going to be the buyer of all that new debt? Especially when you consider that the Fed is trimming its balance sheet.

The PCE data that came out this morning was a bit of a mixed bag, but the important core inflation reading rose to 1.4% y/y; still well below the Fed’s target of 2.0%. The spin will be that the uptick portends higher inflation in the months ahead, but the truth is that the trend for the year remains unquestionably negative.

The market still sees a 90.2% probability of a December rate hike. That FOMC meeting is December 12-13.

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Inevitable Stock-Market Correction To Push Gold Out Of Range – Analyst


KitcoNews/Neils Christensen/11-30-17

Record-high equity markets remain the sector to watch as a correction could be the catalyst needed to push gold out of its narrow trading range, according to one market analyst.

While gold remains resilient with prices holding above its 200-day moving average, Fawad Razaqzada, technical analyst at Forex.com said that he can’t get excited about gold until it pushes above the October high at $1,306 an ounce. However, he added that it could only be a matter of time before this happens.

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Morning Snapshot: Gold Remains Defensive Within Range

USAGOLD/Peter Grant/11-30-17

Gold is down, maintaining a defensive tone within the well defined range. The yellow metal is being weighed by heightened risk appetite, driven by tax cut optimism, which keeps focus on frothy stocks.

U.S. personal income rose 0.4% in October, above expectations of +0.3%. PCE also bested expectations, although moderated considerable from the negative revised +0.9% in September.

Core PCE inflation — the Fed’s preferred measure of inflation — rose to 1.4%, but remains well below the 2.0% target. Inflation has been trending lower this year, which prompted the central bank to pause the tightening cycle in September.

So, does this uptick signal a reversal of that trend, or merely a brief reprieve? That’s a question the FOMC will have to wrestle with in a couple weeks.

The dollar index was unable to sustain a probe above the 100-day moving average in earlier trading, keeping focus on the downside. Continued weakness in the dollar should help protect the low end of the range in gold as well.

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The Daily Market Report: Gold Retreats To Midpoint of the Range


USAGOLD/Peter Grant/11-29-17

Gold fell back into the range in early U.S. trading, driven by heavy selling in the futures market after an upward revision to Q3 GDP. That puts the yellow metal back around the midpoint of the well defined 1260.10/1306.04 range that has dominated for more than a month.

Generally good economic data of late has reinforced expectations of a December rate hike, even though Janet Yellen continues to be surprised by “subdued” core inflation. Supposedly, that’s the main reason that the Fed decided to pause their tightening cycle back in September.

October PCE data are out tomorrow, so we’ll see if the central bank’s preferred measure of inflation picked up at all last month. While Yellen continues to think the weakness is transitory, one has to wonder how long this must go on before she changes her tune.

Also weighing on gold is ongoing strength in the stock market, which has been bolstered by optimism about the GOP tax overhaul, which includes a substantial cut to corporate taxes. If the Senate votes along party lines the legislation will clear the Senate, but the Republicans can ill afford any defectors or abstentions.

Senators Ron Johnson (R-WI) and Steve Daines (R-MT) they oppose the legislation in its present form. There are also at least four Republican Senators that have legitimate concerns about how this legislation will impact deficits and the national debt, and even more on the fence for various other reasons.

Nonetheless, the market likes the fact that the legislation continues to move through the process. Whether something gets to the President’s desk before year-end is still very much in doubt.

Perhaps further complicating the matter is the fact that Congress needs to come up with a budget plan by the end of next week, and raise or suspend the debt ceiling. “I don’t see a deal,” said President Trump via Twitter yesterday. Or of course, they could kick that can yet again.

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Gold ‘breakout’ coming soon to ‘eerily quiet’ market, metals expert says


CNBC/Stephanie Landsman/11-29-17

Gold’s trading activity has been unusually calm this year, but that may be about to change.

…”It’s tough with the events coming up — whether it’s the Fed or tax reform which is very, very important. I think that could lead to volatility,” Dudas said Tuesday on CNBC’s “Futures Now.”

…His 2018 year-end target calls for gold to hit $1400, an 8 percent gain from current levels. According to Dudas, higher inflation expectations in 2018 should be strong enough to push gold prices even higher.

PG View: Dudas sees a 19-20 handle for silver.

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Morning Snapshot: Gold Retreats Into Range After Q3 GDP Revision

USAGOLD/Peter Grant/11-29-17

Gold is down in early U.S. trading after Q3 GDP was revised higher. The dollar rose, pushing the yellow metal back into the recent range as stronger growth provides further justification for a rate hike in December.

U.S. Q3 GDP was revised up to 3.3%, in line with expectations, versus 3.0% previously and 3.1% in Q2. However, it is widely expected that growth is slowing in Q4. We saw some downward revisions yesterday on the surge in the trade deficits.

While the uptick in growth is encouraging, Janet Yellen will reiterate today before the JEC that core inflation “has remained surprisingly subdued.” According to her prepared testimony, released earlier this morning, she will go on to say “the recent lower readings on inflation likely reflect transitory factors.”

It seems like we’ve been hearing that for an awfully long time. We’ll get the latest inflation reading tomorrow with the release of October PCE data tomorrow. If inflation remained steady or increased in October, the market will remain convinced that the hike is on. If inflation slowed, rate hike expectations will be tempered.

Later this morning we get the October Pending Home Sales Index and EIA crude stocks for last week.

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The Daily Market Report: Gold Remains Firm Near 6-Week Highs


USAGOLD/Peter Grant/11-28-17

Gold is up slightly, despite some robust economic data and some hawkish FedSpeak from Jerome Powell. The yellow metal remains underpinned and within striking distance of yesterday’s 6-week high at 1299.30 as a result of political and geopolitical uncertainty.

Both consumer confidence and the Richmond Fed index significantly beat expectations. U.S. home prices continued to rise in September as well, as indicated by the Case-Shiller and FHFA indexes. All of this bodes well for the highly anticipated December rate hike.

However, an unexpected surge in the trade deficit in October has prompted some negative revisions to Q4 GDP expectations. Goldman Sachs trimmed their outlook from 2.6% to 2.3%, while BofA cut their forecast from 2.3% to 1.8%.

Fed chair nominee Jerome Powell said, “The case for raising interest rates at our next meeting is coming together,” during testimony before the Senate Banking Committee. I’d say the case hasn’t really been made until there is some real evidence of rising inflation. PCE is out on Thursday.

Powell contends that it’s time for normalizing interest rates, but it’s pretty clear that old concept of “normal” no longer applies. I don’t believe anyone asked him at what level Fed funds would be considered “normalized.” Nonetheless, and largely as expected, this testimony seems to verify that Powell is inclined to continue the gradual tightening cycle started by Janet Yellen.

On the political front, President Trump tweeted this morning that he was pessimistic about reaching a deal with Congressional Democrats to fund the government beyond December 8th (that’s just a little more than a week away!). Chuck Schumer and Nancy Pelosi quickly pulled out of a meeting with the President that was scheduled for today. “We believe the best path forward is to continue negotiating with our Republican counterparts in Congress instead,” they said in a joint statement.

While Rand Paul has said he will vote for the Senate tax overhaul, there are still a couple of Republican holdouts. A vote may happen as early as Thursday, but Goldman Sachs sees passage before year-end as about a 50-50 proposition. Certainly if a funding deal isn’t reached by the end of next week, those prospects are likely to dim considerably.

North Korea has reportedly conducted a ballistic missile test. The Japanese Coast Guard has apparently reported that that the missile fell into the sea near Japan. This news is breaking as I write and there will be further updates.

This latest provocation comes after South Korea Unification Minister Cho Myoung-gyon warned that the DPKR is “developing their nuclear capabilities faster than expected and we cannot rule out the possibility Pyongyang may declare the completion of their nuclear program in a year.” This is rather ominous as both the Trump administration and military leaders have declared such a situation as unacceptable.

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Gold Flirts With $1,300


Bloomberg/Susanne Barton/11-27-17

Gold futures climbed above $1,300 an ounce for the first time in six weeks as the dollar wavered and investors braced for an onslaught of economic data and political news.

Bullion rose for the third time in four days as a gauge of the dollar traded close to the lowest since September. A report later this week is forecast to show the Fed’s preferred gauge of inflation slowed in October, after Chair Janet Yellen cautioned last week that raising rates too quickly risks stranding inflation below the central bank’s target.

Bullion is up almost 13 percent since Dec. 31, on course for the best year since 2010, as geopolitical uncertainty underpins demand for the metal as a haven and divisions among U.S. central bankers persist over the path of rate policy.

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Gold eases from six-week high ahead of Fed chair confirmation

Reuters/Jan Harvey/11-28-17

Gold eased back on Tuesday from the previous day’s six-week high as the dollar edged up ahead of a confirmation hearing for U.S. Federal Reserve chair nominee Jerome Powell.

In prepared remarks for the hearing released by the Fed on Monday, Powell defended the Fed’s use of its crisis-fighting powers, suggesting a broad extension of current Chair Janet Yellen’s stance on monetary policy.

However, there is some risk around the event which is supporting the dollar after its slide to two-month lows on Monday, analysts said.

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Morning Snapshot: Gold Remains Firm Near $1300

USAGOLD/Peter Grant/11-28-17

Gold is up slightly in early U.S. trading. The yellow metal is holding up pretty well in the wake of yesterday’s push to 6-week highs, just shy of $1300. A firmer dollar and modest stock market gains are perhaps limiting the upside at this point.

U.S. advance trade gap widened to -$68.3 bln in Oct, outside expectations of -$65.5 bln, vs -64.1 bln in Sep. Home prices continue to rise with the FHFA index gaining 0.3% and the Case-Shiller 20-city index gaining 0.4% in September.

Later this morning we’ll see November consumer confidence and the Richmond Fed index. Fed chair nominee Powell appears before the Senate and we’ll hear FedSpeak from Dudley and Harker.

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The Daily Market Report: Gold Jumps To 6-Week High Near $1300


USAGOLD/Peter Grant/11-27-17

Gold is up, having reached a 6-wwek high of 1299.30 in earlier U.S. trading. While gains stalled just shy of $1300, the bias remains to the upside and further challenges of this critical level seem likely.

Gold us being helped by recent weakness in the dollar. The dollar index fell through important support at 92.80 (12-Oct low) to establish fresh 9-week lows. More than 61.8% of the bounce off the September low at 91.13 has now been retraced, making that level a logical target. The DX is now well below the 20-, 50-, 100- and 200-day moving averages, lending credence to the bearish scenario.

Dollar losses gained momentum last week after the FOMC minutes from the November meeting came in more dovish than expected. There also seemed to be heightened concerns about asset valuations.

“In light of elevated asset valuations and low financial market volatility, several participants expressed concerns about a potential buildup of financial imbalances. They worried that a sharp reversal in asset prices could have damaging effects on the economy.” — Minutes of the Federal Open Market Committee, October 31-November 1, 2017

In that respect, the Fed has sort of painted themselves into a corner: The stock market seems to like everything the Fed does these days. Tighter policy and the implications of an improving economy have lifted stocks, while a more dovish Fed (September pause) has also buoyed stock because it means cheap liquidity.

At this point, the market still believes a December rate hike remains baked in the cake. At this point, if the Fed wanted to prick the stock market bubble they would likely have to turn much more hawkish than the market is presently expecting and I think they are disinclined to do so.

With the über-accommodative policy stance over the past decade, the Fed is very much responsible for pushing investors out along the risk curve. Pensions should be of particular concern, because if stocks seriously correct, the already underfunded situation of many public pensions is only going to get worse.

Stocks however will ultimately correct, perhaps as a result of a central bank miss-queue, but more likely due to some external factor outside the control of the central banks. When the next crisis comes, financial writer and publisher John Mauldin believes “central banks and governments will react in ways that are even more unthinkable” than the measures they employed during the financial crisis.

At that time, as the world’s central banks pumped liquidity into the financial system, gold soared to record highs. I suspect the results the next time will be the same.

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Weaker dollar pushes gold prices higher


Reuters/Peter Hobson/11-27-17

Gold prices rose on Monday, helped by a weaker dollar, as investors looked ahead to congressional testimony by the nominee to chair the U.S. Federal Reserve and a meeting between U.S. President Donald Trump and
Senate Republicans on tax reform.

“We’ve seen a fairly firm recovery underpinned by a weaker dollar and some data readings from the U.S. and elsewhere that called into question the sustainability of growth,” said Mitsubishi analyst Jon Butler.

U.S. PMI and capital goods data missed expectations last week, helping to drive the dollar to its weakest in two months.

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Morning Snapshot: Gold Sets 5-Week Highs, Buoyed by Weak Dollar

USAGOLD/Peter Grant/11-27-17

Gold is up to start the post holiday week, setting fresh 5-week highs above 1297.10. The yellow metal is getting a lift from continued dollar weakness in the wake of the more dovish than expected Fed minutes from last week.

While some doubts have been raised about the likelihood of a December rate hike, Fed funds futures continue to show a probability in excess of 90%. Later this week we’ll see the Fed’s preferred gauge of inflation for October, which has the potential to temper rate hike expectations if it remains weak.

Today’s economic calendar is light with October new home sales and the November Dallas Fed index. After the close we’ll hear Fedspeak from doves Kashkari and Dudley. Fed chair nominee Powell will testify before the Senate Banking Committee on Tuesday.

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Gold regains 1290.00 ahead of release of FOMC minutes.

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Gold inches up as dollar dips ahead of Fed meeting minutes

Reuters/Vijaykumar Vedala/11-22-17

Gold prices crept up on Wednesday amid a softer dollar, with investors remaining cautious ahead of the release of minutes from the U.S. Federal Reserve’s last meeting, which could offer hints on the outlook for the central bank’s monetary policy.

…”We are not really sure that this (Fed meeting minutes) will have much of an impact given that the decision to raise rates in December is pretty much a forgone conclusion,” INTL FCStone analyst Edward Meir said.

“Nevertheless, we suspect that investors will want to see what policymakers are thinking about the rate situation and how aggressive they will be on this front going forward.”

PG View: The market thinks a December rate hike is a foregone conclusion, but does the Fed? What if PCE data out next week reflects continued weakness in inflation? That’s the reason the Fed put the tightening cycle on pause back in September.

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Morning Snapshot: Gold Firms Within the Range

USAGOLD/Peter Grant/11-22-17

Gold is up in early U.S. trading, lifted by a softer dollar. More than half of Monday’s sharp intraday sell-off has now been retraced, leaving the low end of the recent range well protected.

U.S. initial jobless claims fell 13k to 239k in the week ended 18-Nov, just below expectations of 240k. However, October durable goods orders really missed the mark, tumbling 1.2% on expectations of a rise of 0.5%. Septembers solid gain was trimmed to +2.0%, from +2.2% previously.

Core capital goods orders fell 0.5%. New orders plunged 5.1%. Nondefense aircraft orders -18.6%. Defense aircraft orders -11.3%.

It would seem the boost derived from recent aircraft orders and the hurricanes has come to an end. Look for some downward adjustments to Q4 GDP expectations. Rate hike expectations may get tempered as well, particularly if next week’s PCE data continues to reflect weak inflation.

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The Daily Market Report: Gold Firms Intraday, Leaving Low End of Range Protected


USAGOLD/Peter Grant/11-21-17

Gold is up modestly in U.S. trading, buoyed by a softer dollar and seemingly ignoring the sharp rise in stocks. Yesterday;s low at 1273.90 provides an additional intervening barrier ahead of the range lows in gold at 1263.00/1260.10.

FedSpeak from Yellen after the close may provide some insight into the true prospects for a December rate hike. However, the minutes from the November FOMC meeting out tomorrow will likely be more valuable in that regard.

Decent to good U.S. economic data of late, reinforces market expectations that the Fed will indeed boost the Fed funds rate by another 25 bps on December 13. Fed funds futures indicate a 91.5% probability of such a move.

UBS is predicting that the dollar will have a rough 2018, particularly against the euro. This would be a perpetuation of the trend that developed this year, where the greenback fell more than 10% against the single currency.

If the dollar has a rough year, it bodes well for another good year for gold. The yellow metal is up 11.2% YTD and as we mentioned in Friday’s DMR, this is the first time in 4-years that such resiliency has been seen going into year-end.

Gold has sold off into year-end for the past 4-years, premised largely on expectations of Fed tightening (either QE tapering or actual rate hikes). This year — with another rate hike decidedly on the table — gold remains resilient. The yellow metal is a mere 4.7% off the high for the year at 1357.50.

The ECB has been talking out of both sides of its mouth in recent weeks, making rumblings about tapering and then saying it intends to keep its foot on the gas. The fact that it cut monthly asset purchases, but plans to do them for longer is reflective of these mixed signals.

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“Foundation For A Rebound?” – Gold Jumps Above Key Technical Level On Heavy Volume

ZeroHedge/Tyler Durden/11-21-17

The last 3 days have been ‘noisy’ in precious metals markets with gold swinging from the best day in 5 months to the worst day in 4 months and now to another high volume surge, breaking the barbarous relic back [above] its 100-day moving-average…

It seems the 100DMA is a key level with heavy volume being used to push gold futures around it.

UBS asks “Is gold establishing a foundation for a rebound?”

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Gold advances, U.S Fed minutes in focus


Reuters/Zandi Shabalala/11-21-17

Gold rebounded on Tuesday as investors anticipated signals on the direction of U.S. monetary policy from the minutes of a November Federal Reserve meeting.

…”The Fed rate hike in December is roughly priced in and unless there are very hawkish minutes, its more that people are looking for direction about future moves,” said Georgette Boelle, a commodity strategist at ABN AMRO.

The minutes are due on Wednesday.

Gold was also profiting from a political crisis in Germany, Europe’s largest economy, boosting bullion’s safe-haven appeal.

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Morning Snapshot: Gold Defensive Back in Lower Half of Range

USAGOLD/Peter Grant/11-21-17

Gold is down this morning, back in the lower half of the range after coming under selling pressure during the U.S. session yesterday. The bottom of the range is well defined at 1263.00/1260.10 and remains protected at this point.

The Chicago Fed national activity index for October came in better than expected. Later this morning we’ll get October existing home sales, which are expected to edge higher to a 5.410M pace.

After the close, Fed chair Yellen will speak at NYU along with former BoE Governor Mervy King. The minutes from the November FOMC meeting will be released tomorrow. The latter will perhaps provide a better window into the Fed’s thinking going into year-end. Is soft inflation still a concern? Is the Fed angling for another rate hike, regardless of the inflation outlook?

Thursday is of course the Thanksgiving holiday. Markets are open on Friday, but trading is historically very thin.

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All the Reasons Cryptocurrencies Will Never Replace Gold as Your Financial Hedge

RiskHedge/Olivier Garret/11-17-17

Despite what the crypto-evangelists will tell you, digital tokens will never and can never replace gold as your financial hedge.

Here are six reasons why.

#1: Cryptocurrencies Are More Similar to a Fiat Money System Than You Think.

#2: Gold Has Always Had and Will Always Have an Accessible Liquid Market.

#3: The Majority of Cryptocurrencies Will Be Wiped Out.

#4: Lack of Security Undermines Cryptocurrencies’ Effectiveness.

#5: Hype and Speculation Continue to Drive Cryptocurrencies’ Value.

#6: Cryptocurrencies Do Not Have Gold’s History as a Store of Value.

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The Daily Market Report: Gold Retreats Into Range After Stalling Ahead of $1300


USAGOLD/Peter Grant/11-20-17

Gold is down in U.S. trading after tests of the upside late last week stalled shy of $1300. Stronger than expected U.S. leading indicators for October buoyed stocks and the dollar, which weighed on the yellow metal.

U.S. leading indicators rose 1.2% in October, well above expectations of +0.5%, versus a positive revised +0.1% in September (was -0.2%). This reading further reinforces expectations for a 25 bps rate hike when the FOMC meets December 12-13. Such a move has been essentially fully priced in by the markets since shortly after the Fed opted to pause the tightening cycle back in September because of soft inflation data.

While inflation data have firmed somewhat since the hurricanes, it remains to be seen whether these price pressures are sustainable. The Fed will get a look at October PCE data a couple weeks prior to the FOMC meeting. This is the Fed’s preferred measure of inflation and hints of renewed weakness could prompt a rather rapid unwind of positioning premised on the all-but assured expectations of a rate hike.

Fed Chair Janet Yellen announced today that she will leave the Fed once her successor is seated. Jerome Powell has been nominated to be the next Fed chair and is expected to get approved by the Senate. That will give President Trump another position to fill at the Fed. We’ll hear FedSpeak from Ms. Yellen tomorrow.

With gold back on the ropes within the range, a breakout in this holiday shortened week is looking unlikely. Recent pullbacks within the range however have been viewed as buying opportunities. Support is well defined at 1263.00/1260.10.

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‘New normal’ of geopolitical risk likely to boost gold prices in coming years, Citi forecasts


CNBC/Sam Meredith/11-20-17

Gold prices are likely to be buoyed by the “new normal” of elevated geopolitical tensions over the coming years, Citi analysts said Monday.

The geopolitical case for gold investment has been emboldened in recent months and it seems as strong today than at any point over the last four decades, Citi analysts said. As a result, gold prices were forecast to “push north of $1,400 per ounce for sustained periods” through to 2020.

…”Event-driven bids for gold seem to be occurring more frequently and may be the new normal… In short, even as the rates and forex channel dominate the outlook for gold pricing, the yellow metal is increasingly being used by investors as a policy and tail risk hedge,” Citi said.

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Gold slips on stronger dollar, but holds near one-month high

Reuters/Pratima Desai/11-20-17

Gold slipped on Monday as the dollar rose, but prices still held near one-month highs hit last week as political and economic uncertainty in the United States dominated sentiment.

…The dollar gained against the euro after German Chancellor Angela Merkel’s efforts to form a three-way coalition government failed. Merkel said she would inform the German president that she could not form a coalition, after the pro-business Free Democrats (FDP) withdrew from negotiations.

…”For gold, there are headwinds in the guise of U.S. interest rate rises, which means higher front-end bond yield curves and an opportunity cost for holding gold,” said Societe Generale analyst Robin Bhar.

PG View: I would point out that the December rate hike remains fully priced.

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Morning Snapshot: Gold Easier Within Range

USAGOLD/Peter Grant/11-20-17

Gold is down modestly to start the holiday shortened week, but the tone within the range remains generally favorable after solid gains on Friday. Focus remains on the next tier of resistance at 1306.04/1308.80 (16-Oct high and 50% retracement of the entire move from 1357.50 to 1260.10).

Political and geopolitical tensions, along with recent weakness in stocks and the dollar, are all helping to underpin the yellow metal within the well defined range.

Negotiations in Germany to form a coalition government collapsed last night after the Free Democratic Party (FDP) walked out. The reaction in Europe has been muted thus far, with the euro recovering from initial losses. However, the risks may be considerable.

The U.S. economic calendar is light today with just October leading indicators. Expectations are for a 0.5% rise, after a 0.2% decline in September.

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The Daily Market Report: Gold Surges to Approach $1300 For the First Time in a Month


USAGOLD/Peter Grant/11-17-17

Gold is up significantly heading into the weekend. The yellow metal surged to new 4-week highs 1289.50, bolstering expectations for short-term tests back above $1300.

Support is coming from political and geopolitical tensions, which have generated some risk aversion and weighed on both the dollar and stocks. December rate hike expectations have retreated somewhat, but remain above a 90% probability. While this may be seen as a limiting factor on the upside, that rate hike is fully priced and therefore the risk there arguably one-sided toward steady policy.

Gold has sold off into year-end for the past 4-years, premised largely on expectations of Fed tightening (either QE tapering or actual rate hikes). This year — with another rate hike decidedly on the table — gold remains resilient. The yellow metal is a mere 4.7% off the high for the year at 1357.50.

Since that high was set in September, the market has coiled in an increasingly narrow range. Such price action is typically associated with a continuation pattern, favoring eventual breakout in the direction of the trend. That breakout may have commenced today, and the underlying trend is up. We’ll see if we get upside follow-through above the next significant tier of resistance at 1306.04/1308.80 (16-Oct high and 50% retracement of the entire move from 1357.50 to 1260.10).

There are a number of events upcoming that could spur gold higher. October PCE inflation is slated for release on November 30. This is the Fed’s preferred measure of inflation and if there are signs of continued weakness, it could conceivable tank rate hike expectations rather quickly. The December FOMC meeting is December 12-13.

While Congress is very focused on tax reform right now, a budget agreement and some accord on the debt ceiling is going to be needed in early December. As noted in yesterday’s DMR, Congress is on break next week for Thanksgiving and the Christmas recess starts on December 18. There really aren’t many working days left this year and by kicking the budget/debt ceiling can in September.

Hold onto your hats! The remainder of the year could be really interesting.

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Gold jumps to new 4-week highs above 1289.50, now up more than $14 intraday.

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Gold gains as dollar dips on uncertainty over Trump tax bill

Reuters/Eric Onstad/11-17-17

Gold rose on Friday as the dollar softened on uncertainty about the progress of what would be the biggest overhaul of U.S. taxes since the 1980s.

…”They’re pricing out Trump’s tax reform once again as a result of those two proposals in Congress that are quite far apart from each other,” said Jonathan Butler, commodities analyst at Mitsubishi in London.

The dollar weakened against a basket of six major currencies and was set for its biggest weekly loss in more than a month.

“There’s also a lot of concern that the equity market rally is possibly becoming a little exhausted for now, and that should be supportive of gold in the short term,” Butler added.

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Morning Snapshot: Gold Edges Higher Within the Range

USAGOLD/Peter Grant/11-17-17

Gold is up in early U.S. trade, underpinned by escalating political uncertainty and geopolitical tensions. The dollar and stocks remain somewhat defensive as well, providing additional support for the yellow metal.

The Wall Street Journal reported yesterday that more than a dozen Trump campaign officials were issued a subpoena by Special Counsel Robert Mueller last month, requesting documents and emails “that reference a set of Russia-related keywords.” This comes at a time when the Trump administration is trying to shepherd tax reform legislation through Congress, deemed critical to keeping their broader economic agenda on track.

North Korea has reportedly rejected Chinese overtures to give-up their nuclear program. “[T]here is no way other than standing against the repressive U.S. imperialists only with a nuclear deterrent of justice,” declared the state-run newspaper Rodong Sinmun.

U.S. housing starts for October came in much better than expected, surging 13.7% to a 1.290M pace. That’s the extent of the U.S. data today.

It’s worth mentioning that Canadian CPI slowed in October to 1.4% y/y, versus 1.6% in September. Median core CPI slowed to 1.7% y/y, down from 1.8% in September. These inflation data come in the month after the BoC surprised with a 25 bps rate hike in September.

A breach of the high from earlier in the week at 1289.50 is needed to clear the way for renewed probes above $1300. Key resistance is marked by the mid-October high at 1306.04, which is the trigger for a retest of the 1357.30 high for the year.

Meanwhile, the low end of the range is well defined at 1263.00/1260.10. Intervening barriers are at 1269.60 and 1264.70.

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The Daily Market Report: Gold Little Changed as Softer Dollar/Firmer Stocks Create Opposing Forces


USAGOLD/Peter Grant/11-16-17

Gold is up slightly within the range. While the dollar remains somewhat defensive, stocks have rebounded, resulting in opposing forces acting on the yellow metal.

The House appears poised to advance their version of tax reform legislation; likely without any support from the minority party. However, some GOP opposition to the Senate bill has emerged. Senator Ron Johnson of Wisconsin has already said he can not vote for the bill and there are a number of other key Republicans that have not committed.

Political uncertainty is likely to remain elevated in the coming weeks as tax legislation either advances or stalls. The key being, whether a bill will reach the President’s desk before year-end.

In the interim, and likely complicating matters, will be the budget discussion and the debt ceiling in early December. That can got kicked back in September, averting a government shutdown and allowing the majority party to focus on tax reform. However, that can may not have been kicked far enough.

The debt ceiling is back in play on December 8, which may provide the Democrats leverage to impact the tax legislation if something doesn’t get to the President before then. Congress is on Thanksgiving break all of next week and the Christmas recess starts on December 18. There really is very little time to get anything done.

Even if tax reform does get done, the long-term implications to the national debt are likely to be significant. Be assured, the debt ceiling will get raised, albeit perhaps not in a timely manner. As the debt continues to rise, servicing costs will continue to rise as well.

This is all coming to a head just as the Fed contemplates another rate hike at the December 12-13 FOMC meeting. The prospects at that time for fiscal stimulus will certainly weigh in the decision making process, as will the long-term debt trajectory.

This all sets the stage for potentially heightened volatility going into the holidays. With gold and silver still well contained and off the highs for the year, now is likely a good time to be boosting your protective hedges.

Precious metals research and consultancy firm GFMS believes gold has “formed a base for a more sustainable move above $1,300 later this year and to rise still further in 2018 as it averages $1,360 and hits a 2018 peak of almost $1,450.” They cite growing equity market risks and continued geopolitical tensions as forces that will likely push the yellow metal higher.

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Posted in Daily Market Report, Gold News, Gold Price, Gold Views |