Private: Marc Faber: “The Most Desirable Currency Will Be Gold”
25-Mar (ProfitConfidential) — Perma-bear investor Marc Faber’s current stock investment advice to retail traders is to expand their exposure to precious metals and Asian economies, while staying away from the U.S. dollar.
“[The U.S. dollar] is not a desirable currency,” Faber, publisher of The Gloom, Boom & Doom Report newsletter, told CNBC on Tuesday. “I think the most desirable currency will be gold, silver, platinum and palladium. I still think the mining sector has embarked on a new bull market.”
The U.S. dollar has depreciated over the past four months, with the U.S. Dollar Index losing 4.4% since its 52-week high of 100.51 on December 2.
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Private: U.S. Q4-15 GDP (final) 1.4%, above expectations of 1.0%, vs 1.0% previously and 2.0% in Q3-15.
Private: Gold lower at 1216.58 (-5.41). Silver 15.17 (+0.001). Dollar and euro little changed. U.S. equity and futures markets closed for Good Friday.
Private: The Daily Market Report: Gold Remains Defensive Within Range
24-Mar (USAGOLD) — Gold remains suppressed within the recent range, weighed by a firmer dollar and an apparent swing back toward expectations for a Fed rate hike in April or June. The central bank seems to be working diligently at bolstering the credibility of a rate hike within the next several months.
While recent hawkish FedSpeak has pushed the dollar higher, the Fed funds futures market remains skeptical. The CME’s FedWatch tool puts the odds of an April hike at 12% and June is at 41%. If the market doesn’t see a rate hike as a credible possibility, it makes it very difficult for the Fed to actually pull the trigger.
U.S. durable goods orders fell 2.8% in February, below expectations of -2.4%, versus a negative revised +4.2% in January. Ex-transportation came in at -1.0% m/m, and -0.5% y/y. It was the 13th consecutive month where annualized core durable goods printed negative. This type of data continues to suggest that the U.S. manufacturing sector is already in a recession.
"Core" Durable Goods Tumbles For 13th Month – Longest Non-Recessionary Stretch In 70 Years https://t.co/cc87wSRUZN
— zerohedge (@zerohedge) March 24, 2016
In the wake of the durable goods miss, the Atlanta Fed’s GDPNow indicator for Q1 was revised down from +1.9% to 1.4%. The final Q4-15 read for GDP comes out tomorrow and is expected to confirm the economy grew at 1.0% pace at the end of last year.
Bullard, Harker, Evans at al can talk all they want about strong fundamentals and the growing prospects for inflation, but the reality is that the economy remains weak. A fact that is not lost on the market as a whole.
While Fed hawkishness can lead to short-term market movements — like this week’s drop in the gold price — the underlying reality suggests that further dovishness is actually warranted. The dip in the price of gold should be viewed as a buying opportunity.
Private: Gold Dragged Down by Stronger Dollar, Fed Expectations
24-Mar (WSJ) — Gold prices fell Thursday, dragged down by a stronger dollar and expectations that the Federal Reserve will raise interest rates in coming months.
Gold for April delivery, the most actively traded contract, was recently down 0.3% at $1,222 a troy ounce on the Comex division of the New York Mercantile Exchange.
Although the Federal Reserve last week dialed back interest rate expectations to only two increases in 2016, investors increasingly believe that one of those moves may come in the next few months. Higher rates tend to weigh on gold, which pays its holders nothing and struggles to compete with yield-bearing investments when borrowing costs increase.
At the same time, anticipation of a Fed move in the first half of the year has firmed the dollar, providing another drag on gold, which is denominated in the U.S. currency and becomes more expensive to foreign buyers when the greenback appreciates.
Gold prices are off more than 4% from their highs of the year, and “the shift in investor focus…back to monetary policy and recent hawkish Fed official comments gives the market rationale to correct still lower,” said James Steel, a strategist at HSBC PLC, in a note to investors.
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PG View: “Higher rates tend to weigh on gold” is a bunch of hooey. One need look back no further than December when the Fed hiked rates for the first time in nearly a decade and gold launched the current rally.
Private: HSBC: Gold best alternative in negative interest rate environment
“A third pillar of support for gold is the global phenomenon of negative interest rates. As we highlighted in Gold rally: Gold glows in a negative rate world, 11 February 2016, gold is one of the few beneficiaries of negative interest rates and deteriorating risk sentiment. With an increasing number of central banks implementing a negative rates policy, and this reflecting continued economic weakness, we expect gold to be supported by this backdrop. Negative rates are a sign of distress, which may increase flight-to-quality demand for gold. They lower the opportunity cost of owning gold and therefore encourage purchases. If the negative rates are deep enough or persist long enough they may encourage the hoarding of cash and gold. Gold may be a better alternative to cash in some cases as gold does not carry the risk of central bank intervention by a monetary authority wishing to limit its currency’s appreciation.” – James Steel, HSBC metals analyst
Private: U.S. Markit services PMI (flash) rose to 51.0 in Mar, below expectations of 51.4, vs 49.7 in Feb.
Private: Gold price retreats on hawkish Fed comments
24-Mar (TheWeekUK) — Concerns over the prospects of more US rate rises has seen the gold price soften after a brief “safe haven” bounce in the wake of the Brussels terror attack.
Gold has risen around 20 per cent this year amid a global economic malaise, but there was speculation it would begin to wilt as the worst of the storm clouds appear to have passed and investors return to speculating on when the Federal Reserve might vote again to raise interest rates.
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The US central bank sounded a dovish and cautious tone last week, lowering its expectations from four rates hikes this year to two. Rates on hold for longer would boost non-yielding gold relative to other, income-generating assets and would hit the dollar, against which it is a hedge.
Gold was also on the rise earlier this week, after the terrorist incident in Brussels, but this short-term bounce dissipated as expected over the subsequent sessions.
However, the outlook has changed following Tuesday’s comments from Patrick Harker, the Philadelphia Fed president, who said the US’s strong labour market would filter through to inflation and that rate-setters should consider renewed policy tightening as soon as next month.
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PG View: The market still doesn’t really believe the Fed will hike in April, odds are at just 12%.
Private: Taiwan cuts discount rate to 1.50% from 1.625%; the third ease in the last six months.
Private: U.S. initial jobless claims +6k to 265k in the week ended 19-Mar, below expectations of 267k.
Private: U.S. durable goods orders – 2.8% in Feb, below expectations of -2.4%, vs negative revised +4.7% in Jan.
Private: Gold steady at 1222.00 (+0.01). Silver 15.27 (+0.005). Dollar firm. Euro lower. Stocks called lower. U.S. 10yr 1.86% (-2 bps).
Private: Everything the Federal Reserve has been trying to do could turn out to be wrong
23-Mar (BusinessInsider) — A major shift seems to be coming to the Federal Reserve.
Over the last few days a number of current and former Fed officials have spoken about their views on the economy, the future of interest rates, and possible ways to tweak their communication strategy.
In a report early Wednesday, CNBC’s Fed whisperer Steve Liesman characterized this as a “mini revolt” now facing Fed Chair Janet Yellen.
This report was followed by St. Louis Fed president James Bullard’s epic interview on Bloomberg Wednesday morning with Tom Keene and Michael McKee.
And what’s clear from Bullard’s comments is that the future of Fed policy seems more and more likely to be grounded in something new and radical than anything like the past.
…Of course many will be quick to note that with seven-plus years of interest rates at or near 0% — and rates in Japan in Europe actually dipping below this level now — central bank orthodoxies have already been upended.
…But the biggest thing said by Bullard on Wednesday was outlining the view that perhaps we’re already in a future of central banking where the obsession over when and where interest rates are heading can be done away with.
In recent speeches, Bullard has referenced the idea of a “permazero” present and future for central banks; Bullard referenced these comments on Bloomberg.
The “permazero” idea broadly says that the Fed’s nominal policy rate can be set at zero indefinitely because in a neo-Fisherian model of interest rates nominal rates are made up of two parts: real rates and inflation expectations.
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PG View: With NIRP, permazero and helicopter money all being bandied about simultaneously, I fear the world’s policymakers have crossed the Rubicon . . .
Private: `Brexit’ Fretting at Bank of England May Be About to Grow
22-Mar (Bloomberg) — With Britain’s referendum on the European Union exactly three months away, Bank of England officials are agonizing over the dangers from a vote to leave.
On Wednesday, Mark Carney will chair the Financial Policy Committee’s first formal meeting of the year — and its last before Britain’s June 23 referendum. Just two weeks after the governor declared an exit vote as the biggest domestic risk to financial stability, officials can now ratify contingency planning for a threat that has rattled investors enough to force a plunge in the pound and a spike in sterling volatility.
Carney’s concerns — dragged out of him by lawmakers at a Parliament hearing — have since become a weapon in the highly charged political battle on EU membership, despite the governor’s attempt to remain above the fray. They suggest how the issue may dominate this week’s discussion, overshadowing topics such as bank capital, housing and a potential lack of liquidity.
“Without a doubt, Brexit is the top of everyone’s agenda until June, and possibly after if we do vote to leave,” said Alan Clarke, an economist at Scotiabank in London. “The FPC’s mandate is the financial system, so they’ll be looking at whether banks will be able to continue to do their business if there is a vote to leave. They may also talk about other risks to the financial sector, whether there would be an exodus of firms.”
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Private: Helicopter Money Takes Flight as Latest Drastic Monetary Idea
22-Mar (Bloomberg) — After more than 600 interest-rate cuts and $12 trillion of asset purchases failed to move the inflation needle enough, central banks may need to head even deeper into uncharted territory.
The way to get the world out of its disinflationary rut could lie in them directly financing government stimulus — a strategy known as deploying “helicopter money” after a 1969 proposal from Nobel laureate Milton Friedman.
Economists at Citigroup Inc., HSBC Holdings Plc and Commerzbank AG all published reports to investors on the topic in the past two weeks, while hedge fund titan Ray Dalio sees potential in the idea. European Central Bank officials are already squabbling about what President Mario Draghi calls a “very interesting concept.”
“We don’t know for certain that ‘helicopter money’ will be the next attempted silver bullet, however the topic is receiving considerably more attention,” said Gabriel Stein, an economist at Oxford Economics Ltd. in London. “The likelihood is reasonably high of some form being implemented somewhere.”
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Private: Technician: Gold heading toward $1,450—here’s why
“Indicators are generally positive on the daily, weekly and monthly charts. However, current readings are slightly overbought on the weekly chart,” said [Zev]Spiro [Orips Research], who believes that prices are overextended from the major moving averages. “Therefore, a continued consolidation may occur before [we see] higher prices.”
MK note: This is another way of saying “Buy the dips.”
Private: The Daily Market Report: Gold Retreats Sharply Within Range, After Fed’s Bullard Suggests Scope for April Rate Hike
23-Mar (USAGOLD) — Gold retreated markedly within the range, with the mainstream financial press touting dollar strength as the primary reason. However, the dollar index is up less than 0.5%, while gold is down more than 2%.
I suspect that there was some speculative shorting in the paper market after yesterday’s terror event failed to garner any upside follow-through. Sell-stops were triggered on the way down, forcing the market lower.
St. Louis Fed hawk James Bullard added additional weight to the market after he suggested that there was a case to be made for an April rate hike. However, the reason he says that is because he sees inflation picking up, and possibly overshooting the Fed’s target.
But wait! Gold is THE classic hedge against inflation. Investors that give credence to Bullard’s projection about inflation, should be buying gold on this dip.
Bullard acknowledged that the Fed shouldn’t hike rates while inflation expectations are falling. He also said that it is unlikely the Fed will go to a negative interest policy.
While Bullard raised some doubts about future central bank intentions, the market still sees an April rate hike as a long shot. The CME’s FedWatch tool shows the chance of an April hike at 14%, a far cry from where it would need to be in order for the Fed to feel comfortable pulling the trigger again.
Meanwhile, in the rest of the world, central banks continue to focus on easier policy. This from Bloomberg:
What they are talking about is helicopter money. Think about that for a second: “[M]ore than 600 interest-rate cuts and $12 trillion of asset purchases” and it hasn’t been enough to reinvigorate growth, nor spark inflation. So they are contemplating dropping money on people.
It’s a testament to economic dysfunction and the failure of montary policy. And that gentle readers is the reason to be buying gold, particularly when the market gives you the gift of lower gold prices, as it has this morning.
Private: U.S. new home sales +2.0% to 512k in Feb, above expectations of 510k, vs positive revised 502k in Jan.
Private: Canada to introduce ‘bail-in’ bank recapitalization legislation
23-Mar (Reuters) — Canada will introduce legislation to implement a “bail-in” regime for systemically important banks that would shift some of the responsibility for propping up failing institutions to creditors.
The proposed plan outlined in the federal budget released on Tuesday would allow authorities to convert eligible long-term debt of a failing lender into common shares in order to recapitalize the bank, allowing it to remain operating.
The plan is in line with international efforts to address the potential risks to the financial system from institutions that are deemed too big to fail, the budget document said.
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PG View: Keep in mind that if you have deposits in a bank, you have essentially lent that money to the bank, making you an unsecured creditor. The good people of Cyprus can tell you all about that reality . . .
Private: Trudeau unveils C$60bn stimulus plan for Canada
22-Mar (FT) — Justin Trudeau has pledged C$60bn (US$46bn) in new infrastructure spending over the next 10 years, hoping to revive sluggish growth in Canada’s resource-rich economy.
The Canadian prime minister was elected last year on a platform promising economic stimulus and his first federal budget will see investment targeted at public transport, water systems and housing.
Bill Morneau, Mr Trudeau’s finance minister, unveiled the measures on Tuesday, saying he planned to revitalise the economy, reduce inequality and “restore hope” for the middle class. The budget will also increase benefits for pensioners and provide tax reductions and benefits to middle-income earners and families.
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