USAGOLD/Peter A. Grant/02-08-17
Gold continues to trend higher, driven by a robust haven bid and the strong technical setup. The yellow metal hit another 3-month high at 1244.71, helped by a softer dollar, stock and yields.
Adrian Ash of BullionVault notes that last month was the best January performance since 2012, and the “fastest 1-month price jump since last summer’s Brexit shock.” February is off to a roaring start as well. The yellow metal is up nearly 8% YTD.
USAToday outlines some of the fundamentals driving the price of gold:
Economic policy uncertainty in the U.S. under President Trump. Political anxiety surrounding the populist movement in Europe and elsewhere. Ongoing stimulus from global central bankers. Angst over rising inflation. The U.S. dollar falling in value versus foreign currencies. — USAToday
Despite two rate hikes over the past 14-months — the only two in more than a decade — Fed policy remains extremely accommodative as well. U.S. economic date continues to be rather erratic, perpetuating doubts about the underlying true health of the economy.
The Atlanta Fed cut their Q1 GDP forecast to 2.7% from 3.4%, citing weaker personal consumption expenditures and fixed investment growth:
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2017 is 2.7 percent on February 7, down from 3.4 percent on February 1. The forecasts for first-quarter real personal consumption expenditures growth and real private fixed investment growth fell from 3.8 percent to 3.1 percent and 8.0 percent to 5.8 percent, respectively, following the data releases on February 2 and 3. — Atlanta Fed
This comes on the heels of sub-2% print for Q4-16 GDP. The chart below plots the Atlanta Fed’s GDPNow forecasts against actual GDP. No great shakes on the growth front . . .
And then this chart came across my Twitter feed yesterday, with the simple caption “Uh-oh.” Presented in this light, even the much ballyhooed labor market is not looking all that healthy.
As we’ve repeatedly mentioned, this recovery is getting very long in the tooth. And whether a recession is just around the corner, or whether it will be forestalled further by debt-fueled fiscal stimulus, gold can be considered critical portfolio diversification in either circumstance.
Many of our clients seem to recognize that stocks are likely overextended again. Recent physical demand has been centered on taking profits off the table in the stock market and bolstering physical gold positions as a means of preserving wealth.