The Daily Market Report: Gold Supported by Geoplitical Risk, Even as Stocks, Dollar Gain

22-Jul (USAGOLD) — Gold has been mostly lower today, but trading conditions are choppy amid decent U.S. economic data, a firmer dollar and persistent geopolitical risks. The latter is keeping the yellow metal underpinned above $1300.

Inflation rose 0.3% in June, in line with expectations. The annual pace remained steady at 2.1%. Core CPI was up just 0.1%, below expectations. Existing home sales, home prices and the Richmond Fed index all beat expectations.

Stocks rebounded from recent downticks, with the S&P500 setting a new all-time high. The dollar index pushed to a new six-week high. And yet, the yellow metal continues to hold relatively firm on the geopolitical risks.

Some were heartened by the cooperation of pro-Russian separatists is Ukraine turning over the bodied of MH17 crash victims, as well as the black box. However, they and the Russians continue to point the finger at the Ukraine military for shooting down the plane.

Israeli forces continue to pound the Gaza strip, amid ongoing militant rocket attacks. The death toll continues to mount even as diplomats continue to try and broker a cease fire that Hamas might actually abide by. The IDF confirmed today that one of its soldiers is missing.

While events in Ukraine and Gaza have dominant the headlines lately, fighting in Iraq and Syria continues as well. ISIS seems to have shifted its focus back to Syria, capturing the Shaar gas field east of Homs city last week. More than 700 have been killed over the last several days.

Al Arabiya News reports that ISIS in now in control of 35% of Syrian territory, including “nearly all of Syria’s oil and gas fields.” The forces of Bashar al-Assad are going to have to respond aggressively or risk being choked off economically. Look for fighting in Syria to intensify.

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

Rising Wages Where? Real Wages Post First Annual Decline Since 2012

22-Jul (ZeroHedge) — For all the talk about “noisy inflation” this and “rising prices are good for the economy” that, what the Fed’s cheerleading squad continues to ignore is the one most important inflation the US economy needs in order to actually have a sustainable recovery instead of centrally-planned stagflation: wage inflation.

So while bullish pundits keep referring to some mythical CEO survey promising wage will increase any day now, just not today, the BLS released its most recent real wage (adjusted for inflation) report moments ago, showing that not only did the average real hourly wage remain flat for the second month in a row at $10.29, the lowest level since September 2013, but posted the first annual decline since October 2012.


Posted in Economy, inflation |

US existing home sales +2.6% to 5.04M pace in Jun, above expectations of 4.995M, vs 4.890M in May.

Posted in Economic Data |

US Richmond Fed index rose to 7.0 in Jul, above expectations of 5.0, vs positive revised 4.0 in Jun.

Posted in Economic Data |

US FHFA home price index +0.4% in May to 212.6; +5.5% y/y.

Posted in Economic Data |

US CPI +0.3% in Jun, in line with expectations, vs +0.4% in May; +2.1% y/y. Core +0.1%, below expectations of +0.2%, vs +0.3% in May; +1.9% y/y.

Posted in Economic Data |

Middle East Seen Gaining Gold Share as Trading Expands

22-Jul (Bloomberg) — The Middle East will take a bigger share of gold demand as buyers from Kuwait to Saudi Arabia to the United Arab Emirates diversify investments and Dubai nears offering a contract for immediate delivery bullion.

MKS (Switzerland) SA, a Geneva-based bullion trader and refiner, expanded into Dubai three years ago and employs 25 people there, with the gold trade an “important market,” said Frederic Panizzutti, chief executive officer of MKS Precious Metals DMCC in the emirate. A spot gold contract due to start on the Dubai Gold & Commodities Exchange this year will draw business from London, said Gerhard Schubert, head of gold and commodities at Arab Banking Corp., a Bahrain-based bank.

“We believe the Middle East has a lot of potential to catch up with the rest of the world,” Panizzutti, 42, said in an interview in Dubai last week.


Posted in Gold News, Gold Views |

Gold dips on Ukraine cooperation signs, stronger dollar

22-Jul (Reuters) – Gold fell on Tuesday as shares rose on speculation tensions between Russia and the West would ease after signs of cooperation from pro-Russian rebels over the downed Malaysian plane, while a stronger dollar ahead of U.S. data also weighed.

A train carrying the remains of many of the 298 victims of the plane disaster last week arrived in Ukrainian government territory on Tuesday as a separatist leader handed over the plane’s black boxes to Malaysian experts.

Spot gold slipped 0.4 percent to $1,306.10 an ounce by 1125 GMT, reversing the previous session’s modest gains, while U.S. gold futures for August delivery were down 0.6 percent at $1,306.20 an ounce.

Gold jumped 1.4 percent last Thursday as some investors sought protection against any drop in equities after news of the loss of the Malaysian passenger plane.

News of the jet disaster, coupled with the prospect of harsher Western sanctions on Russia and increased violence in the Middle East after Israel’s ground offensive in Gaza, have contributed to keep gold prices above $1,300 an ounce in the past week.


Posted in Gold News, Gold Views |

Gold lower at 1306.55 (-4.61). Silver 20.82 (-0.064). Dollar higher. Euro slides. Stocks called higher. US 10yr 2.49% (+3 bps).

Posted in all posts |

Yellen encourages ‘fully-fledged equity bubble,’ says Jeremy Grantham

21-Jul (MarketWatch) — Jeremy Grantham blasts Janet Yellen and her predecessors at the Federal Reserve in his latest quarterly letter.

The Fed chairwoman is “sticking faithfully” to the “clearly wrong” policies of Alan Greenspan and Ben Bernanke, writes Grantham, who is the founder of Boston-based money manager GMO and has a reputation for sniffing out market bubbles early.

He says:

“She will not use interest rates to head off or curtail any asset bubbles encouraged by the extremely low rates that might appear. And history is clear: very low rates absolutely will encourage extreme speculation. But Yellen will, as Greenspan and Bernanke before her, attempt to limit only the damage any breaking bubbles might cause.”


Posted in Central Banks, Monetary Policy |

The Daily Market Report: Gold Underpinned by Geopolitical Tensions and Growth Risks

21-Jul (USAGOLD) — Gold gave back earlier gains, but remains above $1300, underpinned by broad geopolitical tensions and weaker shares. Ongoing concerns about the health of both the European and U.S. economies is also helping to underpin the yellow metal.

Renewed fighting in Donetsk has reportedly killed four, even as investigators arrive in the area to inspect the Malaysian airliner crash site. President Obama said, “The burden is on Russia now to insist separatists stop tampering with the crash site.” In general, international pressure on Russia has intensified since the downing of flight MH17.

This past weekend saw the most intense fighting of the Israeli incursion into Gaza. U.S. Secretary of State John Kerry is supposed to heading back to the middle east with the goal of negotiating another cease fire, hopefully one that both sides will respect.

The Bundesbank expressed concern that the German economy slowed in Q2. “”Industry shifted down a gear. As well as calendar effects, increased geopolitical tensions likely played a role in this,” according to the monthly report of the central bank.

The Financial Times reported this morning that even if the U.S. economy rebounds sharply in Q2, growth in the first half of the year is likely to come in below 1%. While many believe — or rather ‘hope’ — that the terrible Q1 results were an anomaly, optimism that the U.S. would see 3% growth this year has waned in recent months.

Consensus for the Q2 advance report, out next week (30-Jul), suggests the Q1 decline of -2.9% will be offset by a +2.9% rebound. However, policymakers’ and analysts’ expectations for Q1 were so wildly off the mark that I’m not sure anyone has a firm grasp on the reality at this point.

The dollar remains generally consolidative, near four-week highs as growth risks seem to be centered on Europe at this point. The return of volatility to global stocks has some concerned about those markets topping, which is helping to underpin the greenback and pushed U.S. yields back into the lower reaches of the recent range. The yield on the 10-year note is back below 2.50%, presently trading at 2.46%.

Low yields are generally favorable to gold and recent activity in the fixed income market seems to counter recent speculation that a rate hike is likely sooner than many are expecting. If upcoming economic data confirm the growth risks, the ECB and Fed will likely have to keep their feet on the monetary gas pedals, which should offer further support to the yellow metal.

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

The dollar’s 70-year dominance is coming to an end

19-Jul (Telegraph) — In early July 1944, delegates from 44 countries gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire. A three-week summit took place, at which a new system was agreed to regulate the international monetary and financial order after the Second World War.

The US was already the world’s commercial powerhouse, having eclipsed the British Empire several decades earlier. America was also on course to be among the victors of “Europe’s conflict”, even though its economy was largely unscathed by war. As such, Bretton Woods was US-dominated and produced a settlement largely on US terms.

Seventy years ago this week, that fateful summit ended. Its close marked the moment the dollar’s unquestionable supremacy was secured. Since then, global commerce has been conducted largely in dollars and leading economies have held the greenback as their primary reserve currency.

…The advantages this system bestows on the US are enormous. “Reserve currency status” generates huge demand for dollars from governments and companies around the world, as they’re needed for reserves and trade. This has allowed successive American administrations to spend far more, year-in year-out, than is raised in tax and export revenue.

…The dollar’s status is a big question. Judging the outcome is more akin to star-gazing than scientific economics. But the establishment of this BRIC Development bank, timed to coincide with the anniversary of Bretton Woods, is an audacious and significant move. The world’s emerging giants now have thumbscrews on the West.


Posted in U.S. Dollar |

QE: New York Fed purchases $1.067 billion in Treasury coupons.

Posted in Central Banks, Monetary Policy, QE |

US GDP vs job growth: no winners

21-Jul (Financial Times) — Does something have to give?

A comparison of US gross domestic product and employment growth paints a jarring picture of the world’s largest economy in the first half of the year.

Even if US GDP rebounded sharply last quarter, overall growth for the first half is still likely to be under 1 per cent after the steep contraction in January, February and March.


Posted in Economy |

Bundesbank Expects Germany Economy To Stall In Q2

21-Jul (RTT Nes) The German economy is likely to stall in the second quarter as geopolitical concerns dragged industrial production, Bundesbank said in its monthly report on Monday.

Industry shifted down a gear, it said. Considering that the services sector probably expanded further, the real adjusted gross domestic product could have kept the same level in the second quarter as in the first quarter, the bank added.


Posted in Economy |

Gold Advances as Unrest Weighed Against U.S. Outlook

21-Jul (Bloomberg) — Gold gained in New York, after the first weekly loss in seven, as investors weighed tension in Ukraine and Gaza against the outlook for higher U.S. interest rates. Palladium traded below a 13-year high.

Gold slipped 2 percent last week as the dollar climbed to a four-week high versus 10 major currencies and Federal Reserve Chair Janet Yellen said benchmark rates could increase sooner than expected. Bullion slid 28 percent last year on expectations the Fed will reduce monetary stimulus.

Unrest in Ukraine and the Middle East partly helped gold rebound 9.4 percent this year. Russian President Vladimir Putin is facing intensified international pressure after pro-Russian rebels were blamed for downing a passenger jet on July 17, killing 298 people on board. A ground offensive in Gaza entered its bloodiest phase yet after two weeks of fighting between Palestinian and Israeli soldiers.


Posted in Gold News, Gold Views |

Gold higher at 1317.14 (+6.94). Silver 21.05 (+0.21). Dollar firm. Euro soft. Stocks called lower. US 10yr 2.49% (unch).

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Espírito Santo International Files for Creditor Protection

18-Jul (The Wall Street Journal) — Portuguese conglomerate Espírito Santo International SA filed for creditor protection in a Luxembourg court, saying it is unable to meet its debt obligations.

The filing comes as prosecutors in Portugal disclosed Friday that they are investigating issues related to Espírito Santo and its entities, as the central bank moved to calm fears about one of the company’s partly owned units, lender Banco Espírito Santo SA, BES.LB +0.24% Portugal’s second-largest lender by assets.

Closely held Espírito Santo International said Friday that the move to reorganize “will be in the best interest of its creditors,” given it will allow for a “transparent and orderly disposal” of assets. Once the court approves the request, the conglomerate said, enforcement actions by creditors will be suspended.

Espírito Santo International, through its main unit Rioforte Investments, holds assets ranging from real estate and hotels in Portugal and Brazil to a 49% stake in Espírito Santo Financial Group SA, which owns 20% of Banco Espírito Santo.

…Separately, Portugal’s central bank said Banco Espírito Santo had a big enough capital buffer to protect itself from its troubled parent, even in a worst-case scenario.


Posted in all posts |

This tweet shows why some are skeptical about rebels shooting down MH17 without Russian help

18-Jul (Vox) — The world in general, and the US government in particular, seems to coalescing around the hypothesis that Malaysian Airlines flight MH17 was most likely shot down by separatist rebels in eastern Ukraine. There are several very good reasons to suspect this.

But there is also at least one pretty significant reason to doubt that eastern Ukraine’s ragtag rebels really did this, or that if they did that they were operating entirely on their own. The military technology that shot down MH17 was, because of its high altitude, almost certainly a Russian- or Ukrainian-made Buk surface-to-air missile system. The Buk, sometimes called SA-11 by Americans, is no simple, shoulder-mounted missile: it is a complex system of one to three vehicles that requires extensive training to just turn on.


PG View: The tweets mentioned in the title of this piece show images of the controls of the Buk surface-to-air missile system.

Posted in Geopolitical Risks |

The Daily Market Report: Gold Retreats, But Geopolitical Risks Underpin

18-Jul (USAGOLD) — Gold retraced much of Thursday’s gains in overseas trading on Friday. However, the tense geopolitical situations on various fronts should keep the downside limited.

President Obama said today that the evidence thus far indicates that the missile which took down Malaysian Air flight MH17 was fired from an area of Ukraine controlled by pro-Russian separatists. He has asked for a cease fire so that the downing of the plane can be properly investigated.

German Foreign Minister Steinmeier told Der Spiegel, “A further escalation is not out of the question, the situation continues to be extremely dangerous. The fighting in Donbass has continued with unmitigated severity. People are dying every day.”

The flight MH17 disaster came the same day that the U.S. announced additional sanctions on Russia for its involvement in the Ukrainian unrest. The new sanctions target major banks, energy companies “and a significant swath of the Russian defense industry,” according to the Washington Post.

One thing is all-but certain, if the Ukrainian rebels had a sophisticated SAM system, it came from Russia. As the evidence continues to accumulate, international outrage is likely to escalate, perhaps leading to still more sanctions. Will this cause Russian president Putin to back down? Or will he instead lash out?

In Gaza, the IDF continues to prosecute the ground attack, seeking to destroy Hammas rocket launchers and tunnel complexes. Prime Minister Netanyahu warned today that Israel may “significantly widen” ground operations.

There are reports circulating that suggest ISIS may have used chemical agents in the Kurdish enclave of Kobane. If proven to be true, it would mark yet another escalation of the situation in Iraq and Syria.

Despite the geopolitical tensions, gold appears poised for its first weekly loss of the last seven. This is attributable to several massive sell orders in the Comex paper market early in the week. Going into the weekend, gold is trading almost exactly at the midpoint of the range that has dominated for the past year.

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

Obama: MH17 shot down from area controlled by Russian separatists

18-Jul (Politico) — President Barack Obama said evidence thus far indicates the downing of Malaysia Airlines flight MH17 was caused by a surface-to-air missile launched from areas in Ukraine controlled by Russian separatists.

In a speech from the White House briefing room, Obama called for an immediate ceasefire in the area so that a “credible international investigation” can be conducted.

“The deaths are an outrage of unspeakable proportions,” Obama said, adding that at least one American citizen has died in the crash.


Posted in Geopolitical Risks |

US consumer sentiment slipped to 81.3 in Jul, below expectations of 82.0, vs 82.5 in Jun.

Posted in Economic Data |

US leading indicators +0.3% to 102.2 in Jun, below expectations of +0.5%, vs upward revised 0.7% in May.

Posted in Economic Data |

While Iraq burns, Isis takes advantage in Syria

18-Jul (BBC News) — While international attention has been fixated on the disintegration of Iraq and the expansion of the so-called caliphate of Abu Bakr al-Baghdadi, the Sunni insurgents have moved their offensive back into Syria with a newly acquired haul of US-made weapons and cash.

Cushioned by the impunity offered them by a largely unresponsive international community, and the inability of the Syrian and Iraqi armies to defeat them in battle, Isis’ latest advances in Syria have further destabilised the already frail dynamics in the region.

As Bashar al-Assad attended his de-facto self-coronation affording him another seven years in power, Isis was making a mockery of the president’s pledge to “not stop fighting terrorism and striking it wherever it is until we restore security to every spot of Syria”.

In addition to Isis, Syria’s Kurds have also been busy establishing their own cantons of self-governance, backed by their militia force, the People’s Protection Units (YPG). But as their control over Kurdish areas of Syria has strengthened, it has brought them into fierce conflict with Isis.


Posted in Geopolitical Risks |

Gold Weaker on Corrective Pullback, but Geopolitics Limits Selling Interest

18-Jul (Kitco News, via Forbes) – Gold prices are weaker in early U.S. trading Friday, on a downside correction and chart consolidation following decent gains seen Thursday. August Comex gold was last down $5.50 at $1,311.40 an ounce. Spot gold was last quoted down $7.10 at $1,311.50. December Comex silver last traded down $0.137 at $21.055 an ounce.

Geopolitics is back on the front burner of the market place late this week, and with a double-barrel blast. On Thursday morning a Malaysian airliner was shot down on the Russia-Ukraine border, and on Thursday afternoon Israel started a ground offensive against Hamas on the Gaza strip. World stock markets recoiled on the two major world developments. Meantime, safe-have assets, including gold, moved back into favor late this week.

However, as world trading moved from Asia, to Europe, to the U.S. Friday the market place settled down a bit. Many market watchers are scratching their heads that the market place has calmed down fairly quickly Friday morning. The U.S. stock indexes and U.S. Treasuries are stable, while safe-haven gold prices are moderately lower. As mentioned in this space earlier this week, I am surprised at the nonchalance of the market place this summer, regarding geopolitical matters that are significant.


Posted in Gold News, Gold Views |

Israel steps up Gaza ground offensive, civilian casualties grow

18-Jul (Reuters) — Israel intensified its land offensive in Gaza with artillery, tanks and gunboats on Friday and warned it could “significantly widen” an operation Palestinian officials said was killing ever greater numbers of civilians.

Palestinian health officials said 27 Palestinians, including a baby, two children and a 70-year-old woman, had been killed since Israel sent ground forces into the densely-populated strip of 1.8 million Palestinians on Thursday.

The Israeli military said it killed 17 Palestinian gunmen while another 13 surrendered and were taken for questioning after the infantry and tank assault began in the Islamist Hamas-dominated territory.

One Israeli soldier was killed and several others were wounded in the operations, in which some 150 targets, including 21 concealed rocket launchers and four tunnels, have been attacked, according to the military.


Posted in Geopolitical Risks |

Malaysia Airlines Flight MH17 Crash: What We Know

18-Jul (NPR) — One day after the downing of Malaysia Airlines Flight MH17 over eastern Ukraine, investigators are working to learn more about the crash — and who might be responsible. The passenger jet had nearly 300 people on board; none survived.

The plane had not sent a distress signal. It reportedly came apart at a cruising altitude of 33,000 feet, with its wreckage landing in territory held by pro-Russian insurgents.

The flight plan filed by the plane’s pilots had requested an altitude of 35,000 feet during their passage over Ukraine, but air traffic control in Ukraine instructed them to fly at 33,000 feet, .

U.S. intelligence experts suspect a surface-to-air missile hit the airliner, a Boeing 777.

“They have not determined where the missile was fired from,” NPR’s Jackie Northam reports for Morning Edition.

…Kiev officials accuse the separatists of firing a missile at the jet. The separatists, Ukraine’s military and Russia have all denied any involvement.


Posted in Geopolitical Risks |

Greece Seen Needing Third Bailout as Bonds Insufficient

18-Jul (Bloomberg) — Greece’s return to bond markets after a four-year exile hasn’t convinced economists it can avoid a third bailout.

Six out of 10 economists in a Bloomberg News survey said Greece will need to top up the 240 billion euros ($325 billion) of loans received from Europe and the International Monetary Fund since 2010, when it lost access to bond markets. The IMF forecasts Greece will have a 12.6 billion-euro financing gap next year.

“Greece’s ability to generate sufficient funds to cover that is not sufficient,” said Gianluca Ziglio, executive director of fixed-income research at Sunrise Brokers LLP in London, referring to the financing shortfall. “Eventually the European partners will have to come up with something to basically bridge the funding needs that Greece has from now to the time in which it can establish a regular and sizable market access.”


Posted in Debt, European Debt Crisis |

Gold lower at 1309.00 (-10.58). Silver 20.91 (-0.245). Dollar better. Euro steady. Stocks called better. US 10yr 2.47% (+2 bps).

Posted in all posts |

S&P 500 Tumbles, Treasuries Rally on Geopolitical Tension

17-Jul (Bloomberg) — The Standard & Poor’s 500 Index (SPX) fell the most in three months, while Treasuries rallied with gold as demand for have assets rose amid escalating tension in Ukraine and the Middle East. Sanctions against Russia intended to curb violence sent European markets lower.

…A passenger jet crashed in Ukraine, killing all 295 people on board. The government in Kiev blamed pro-Russian rebels for shooting down the Malaysian Airlines jet, while the separatists deny the accusation. The plane crashed in the main battleground of Ukraine’s civil war and is one of a number to have been downed in the region in the past month. Israel has begun a ground invasion of Gaza, the prime minister’s office said.


Posted in Geopolitical Risks, Gold News |