Gold trading pattern last four years

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Credit Suisse sees gold averaging $1,338/oz in 2017

SMM News/12-8-2016

“Looking ahead, Credit Suisse argues against the view of many pundits that U.S. President-elect Donald Trump’s fiscal policies are likely to hurt gold. The market has factored in an expectation that a mix of U.S. tax cuts, deregulation and infrastructure spending will boost the economy, pushing up real interest rates and strengthening the U.S. dollar. ‘We counter that trade protectionism and anti-immigration policies are negative for growth and positive for inflation,’ Credit Suisse said.”

MK note:   Since election day, the markets have reacted as if the Trump administration were likely to be a re-run of the Reagan years. “Stocks and the dollar,” reported Bloomberg recently, “have risen since the Nov. 8 presidential election on hopes that Trump’s advocacy of big tax cuts, increased defense spending and deregulation will usher in another period of prosperity. The coming change will be a ‘profound president-led ideological shift’ akin to Reagan’s, according to Bridgewater Associates founder Ray Dalio. Trump’s advisers and the billionaire himself have embraced the comparison.”

Though there are profound similarities between the two philosophically in terms of tax, defense and deregulation policy, the economic conditions Trump will face are the polar opposite of what Ronald Reagan faced in 1981. Investors, as a result, could be basing investment decisions on a false assumption.

When Reagan took office the United States was just coming off a disastrous encounter with runaway inflation.  If inflation was going to be tamed, the interest rate would have to be pushed to a level higher than the inflation rate, something then-Fed Chairman Paul Volcker in fact accomplished. It killed inflation, restored dollar strength and touched off a long-term stock market rally.

This time around, the United States is coming off a brush with a disinflationary crisis that still threatens to tumble into full-scale deflation.  Different medicine is required.  In fact, there have already been rumblings that the Fed will be very careful to keep the interest rate under the inflation rate for the foreseeable future. The goal is to ignite inflation – an outcome that by definition would undermine the purchasing power of the dollar.  How the markets will perform under such circumstances remains to be seen, but already some analysts are predicting a return to a 1970s-style stagflation – an environment that produced a bear market in stocks and bonds and a bull market in precious metals, quite the opposite of what markets are signaling at this point in time. (The bond market, thus far, stands alone among primary investment markets as reacting according to the historical script.)

Two different worlds – Reagan’s and Trump’s – and the incongruity of market expectations when measured against the historical record is telling. Eventually the financial markets will come down from the present euphoria and begin to consider what the odds-on economic reality will look like for 2017 and thereafter.  Credit Suisse may be on to something.

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Gold Down as Money Flows Out of Metals ETFs

09-Dec (WSJ) — Gold prices posted their fifth straight weekly decline Friday, as money continued to flow out of exchange-traded funds that invest in the precious metal.

Gold for February delivery closed down 0.9% at $1,161.90 a troy ounce on the Comex division of the New York Mercantile Exchange. A settlement at these levels would be the metal’s lowest close since February.

The metal has suffered since Donald Trump was elected president as surging stock markets and rising bond yields have reduced its allure.


PG View: The paper sellers were active last year too ahead of the December rate hike as well, allowing physical buyers to acquire gold on the cheap.

Posted in Gold News, Gold Views |

China’s liquidity flood stirs memories of the Mongols and Mao

Financial Times/James Kynge/12-1-2016

“[Officials] fear that Chinese corporations and citizens will decide en masse that they would be better off taking their money abroad to buy companies or invest in gold, stocks or real estate. Such capital flight could sap the liquidity that is required to keep China’s bubble from popping.”

MK note:  China has “sent its printing presses into overdrive,” says Financial Times columnist James Kynge.  So what’s next?  Some interesting history and conjecture in this op-ed.

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The Daily Market Report: Gold Defensive on Renewed Dollar Strength

09-Dec (USAGOLD) — Gold turned defensive once again within the range after upbeat U.S. data this morning further buoyed the dollar. The greenback was already being driven higher by recent weakness in the euro.

U.S. wholesale sales rose more than expected in October and preliminary consumer sentiment in December looks pretty robust. The latter may translate into a solid holiday shopping season, but we’ll have to wait for more data.

All eyes are on next week’s FOMC meeting. A 25 bps rate hike is broadly expected, although I think the point made by Danielle DiMartino Booth that I noted in yesterday’s DMR is a good one:

“If [Janet Yellen] wants to be truly apolitical, she holds off in December. Because we’ve already seen tightening.” — Danielle DiMartino Booth

That is very true. The 10-year note is up a whopping 40 basis points since election day. Mortgage rates are at levels not seen in 2-years. Does the Fed dare hike rates in such an environment? Last year’s tightening was a credibility play and they hiked into weakness, this year they have better data, but the markets have already provided considerably tighter monetary conditions. I still think they pull the trigger, but I think there will need to be a discussion about the potential implications.

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

ECB rejects Italy’s plea for more time to rescue Monte dei Paschi

09-Dec (FT) — The European Central Bank’s supervisory arm has rejected a request from Rome to delay a private sector-led rescue for Monte dei Paschi di Siena, leaving Italy little option but trigger a government bailout and impose losses on creditors.


Posted in Europe |

University of Michigan consumer sentiment (prelim) rose to 98.0 in Dec, above expectations of 94.5, vs 93.8 in Nov.

Posted in Economic Data |

U.S. wholesale sales +1.4% in Oct, above expectations of +0.6%, vs positive revised +0.4% in In Sep; inventories -0.4%.

Posted in Economic Data |

Morning Snapshot: Gold pressured within range on dollar strength

09-Dec (USAGOLD) — Gold is under pressure within the recent range as renewed euro weakness pushes the dollar back toward its recent highs. The single currency is plumbing critical support as risks escalate within the EU in the wake of last weekends Italian referendum and the ECB’s interesting decision to extend QE and then early next year reduce the amount of monthly asset purchases. If support in EUR-USD at 1.0461 gives way, the likely result will be a move toward parity.

U.S. wholesale sales for October (+0.6% expected) and the preliminary University of Michigan consumer sentiment read for December (94.5 expected) come out at 10:00ET. And then of course next week we have the December FOMC meeting.

Posted in Gold News, Gold Views, Snapshot |

Gold easier at 1168.78 (-1.71). Silver 17.10 (+0.028). Dollar higher. Euro lower. Stocks called higher. U.S. 10-year 2.40% (-1 bp).

Posted in Markets |

The Daily Market Report: Gold Resilient In the Face of ECB Inspired Volatility

08-Dec (USAGOLD) — Gold softened within the range as the euro reacted negatively to today’s ECB policy decision, pushing the dollar sharply higher. While the dollar index is up more than 1% today, the yellow metal is displaying some resiliency, down less than 0.4%.

The ECB held rates steady today, as was widely expected. They decided to extend QE through the end of 2017, but the market was confused by the decision to cut monthly purchases after March from €80 bln to €60 bln. The market screamed “taper!” Mario Draghi was clear that because there was no discussion of taking QE to zero, it was NOT a taper.

The markets still seem a little confused, but I’m guessing the reduction is monthly purchases is likely a function of the diminished supply of qualified assets available to buy. I mean, once you throw in bonds that yield below the deposit rate — as they did today — what else is there? Well, there’s always stocks . . . and gold . . .

And what of our own central bank’s plans? A look at the market suggests that a rate hike next week is all-but a sure thing.

Former Fed insider and President of Money Strong, Danielle DiMartino Booth told Grant Williams of RealTV that “If [Janet Yellen] wants to be truly apolitical, she holds off in December. Because we’ve already seen tightening.” Wouldn’t that be a kick in the pants?!

The bond market has gotten shellacked since Donald Trump’s surprise election exactly a month ago. The magnitude of the tightening is likely far in excess of what the Fed might have expected from a 25 bps rate hike earlier in the year. So, do they go through with it next week anyway and push rates higher yet? Or do they hold pat and watch the great unwind of current positioning?

One thing seems certain, next week’s Fed policy decision may not be the lay-up that everyone was expecting. Given the uncertainty, gold might be a good place to be.

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

Market indicator hits extreme levels last seen before plunges in 1929, 2000 and 2008

CNBC/Tae Kim/12-8-2016

MK note: CNBC interviews Robert Schiller, the economist who created that indicator.

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Gold retreats after ECB says it plans on tapering stimulus

08-Dec (MarketWatch) — Gold futures traded lower Thursday, and were set to give back much of the gains seen a day earlier as the dollar strengthened against the euro after a European Central Bank decision to pare its bond-buying program.

Gold remains confined to relatively tight trading ranges with one closely watched central-bank meeting down but another, the Federal Reserve’s latest interest-rate gathering, coming next week. Gold has been tracking the dollar and Treasury yields ahead of these interest-rate policy decisions, with a downside tilt.


Posted in Gold News, Gold Views |

Morning Snapshot: Gold modestly lower within range as ECB fosters confusion

08-Dec (USAGOLD) — Gold is modestly lower within the range as the dollar gains on euro weakness. The ECB held steady on policy this morning, but extended the QE program through the end of next year. However, after March the monthly purchases will be reduced from the present €80 bln per month to €60 bln per month. So, is that a taper or not?

I think not. Largely because the ECB continues to warn about risks to growth and forecast below target inflation, while saying “uncertainty prevails everywhere.” I suspect this is more about the availability of assets to buy. Of course the ECB made it clear that it could re-expand purchases and/or extend the program again as needed. As for the ongoing expansion of qualified assets they could buy, Koos Jansen reminds us this morning that gold remains an option and he thinks they will go there eventually.

Posted in Gold News, Gold Views, Snapshot |

Gold A Bit Weaker On Lack Of Bullish Inputs, Bearish Chart Posture

08-Dec (Kitco News) – Gold prices are just slightly lower in early U.S. trading Wednesday. The bulls are in desperate need of some fresh fundamental news that would be supportive for the safe-haven metal. Such news has been virtually non-existent the past few weeks, as world stock markets have rallied, including U.S. stock indexes pushing to record highs. February Comex gold was last down $1.20 an ounce at $1,176.40. March Comex silver was last down $0.12 at $17.155 an ounce.

The big data point of the day Thursday saw the regular meeting of the European Central Bank keep its interest rates unchanged and extend the ECB’s bond-buying program by nine months, to the end of 2017. However, the ECB in April will reduce its monthly bond purchases to 60 billion Euros, from 80 billion currently. The marketplace was not completely surprised by the “tapering” of the bond purchases. Still, the move was deemed just a bit hawkish.


Posted in Gold News, Gold Views |

ECB to scale back QE to €60bn a month

08-Dec (FT) — The European Central Bank has decided to scale back its landmark quantitative easing programme from €80bn to €60bn a month, in a move that responds to hawks’ concerns about ultra-loose monetary policy but which could unsettle markets.

The bank confirmed that it would buy €80bn a month of bonds under the current leg of the programme until March, but added that it would reduce the purchase size to €60bn for the nine remaining months of 2017.


Posted in Central Banks, Monetary Policy, QE |

ECB holds steady on rates. Extends QE, but will reduce monthly asset purchases by €20 bln to €60 bln after March. Draghi presser underway.

Posted in Central Banks, Monetary Policy, QE |

U.S. initial jobless claims -10k to 258k in the week ended 03-Dec, above expectations of 255k.

Posted in Economic Data |

Gold easier at 1172.31 (-2.74). Silver $17.10 (-0.088). Dollar higher. Euro lower. Stocks called higher. U.S. 10-year 2.40% (+6 bps).

Posted in Markets |

Sudden Scramble for Gold In China Sends Premiums to Three Year High

07-Dec (Global Research) — While paper gold traders can’t seem to dump the precious metal fast enough, physical gold demand is soaring around the world. India retail premiums are spiking (amid demonetization), local China premiums soar to a 3-year-high (as capital controls loom), and coin sales from the US Mint have risen for the 4th straight month, accelerating post-election to the highest since July 2015 since Trump’s victory at the election.

…But it’s not just Asia.

In the US, physical gold demand has soared post-election in The United States as the paper prices was pummeled…


PG View: We’ve seen this time and time again: When paper sellers drive the price of gold lower, the physical buyers take advantage.

Posted in Gold News, Gold Views |

The Daily Market Report: Gold Firms as Dollar Slips

07-Dec (USAGOLD) — Gold jumped to a new high for the week, buoyed by a softer dollar and perhaps a little bit of exhaustion on the part of the shorts in the paper market. That seems even more evident in silver, which surged to three-week highs above $17. Silver is up more than 2.5% so far today.

The Bank of Canada held steady on rates today, as was widely expected. While the BoC says the global economy has strengthened, they noted that there was still slack in the Canadian economy owing to persistent uncertainty, that is “undermining business confidence and dampening investment in Canada’s major trading partners.”

When the Fed meets next week, they are expected to nudge rates higher, despite those uncertainties. It would be the second rate hike in more than a decade. Prior to last December’s tightening, the last rate hike occurred in June 2006!

When the Fed hiked last December, it pretty much marked the low for gold. Perhaps the shorts are bailing today for fear that next week’s anticipated hike will correspond closely with another low.

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

BoC holds steady on rates, in line with expectations, citing remaining slack in economy.

Posted in Central Banks, Monetary Policy |

U.S. JOLTS job openings fell to 5.534M in Oct, vs positively revised 5.631M in Sep.

Posted in Economic Data |

China’s forex reserves drop $70 bn as outflow accelerates

Financial Times/Hudson Lockett, Tom Hancock and Charles Clover/12-7-2016

“The fifth consecutive monthly fall points to growing difficulty for policymakers. Since a sharp renminbi depreciation in August 2015, Beijing has sought to combat more severe softening against the dollar by selling the US currency from the central bank’s forex reserves.”

dominoes,jpgMK note: Falling Chinese reserves represent pressure on the yuan which in turn imposes two frontline effects important to gold owners: (1) increased gold demand within China among its citizenry and institutions, and (2) increased pressure on U.S. interest rates as bond principle erodes, on the 10-year Treasury for example, due to the selling. (“Selling US currency” translates to selling US Treasuries)  Koos Jansen, the China gold specialist, reports strong on-going gold demand in China even with import restrictions, though not at the record levels of the last few years.  A big behind the scenes problem, as the FT article points out, is that rising U.S. interest rates means emerging countries, including China, will be paying significantly more on their dollar-denominated debt than previously.  China, in fact, is attempting to keep the yuan from cratering by selling U.S. Treasuries, but the net effect is to push dollar rates and the dollar even higher, which in turn puts more pressure on the yuan. Eventually, this self-perpetuating tailspin could translate to significant systemic risks as the risk of default spreads from emerging to developed countries and their banks.   Odd markets.  Odd times getting odder by the day.

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Gold edges off lows ahead of ECB, Fed meetings

07-Dec (Reuters) — Gold firmed on Wednesday, rising further from this week’s 10-month low on the view that a surge in the dollar, higher risk appetite and expectations for a U.S. interest rate rise next week are already reflected in prices.

The metal extended losses earlier this week after its biggest monthly fall in more than three years in November as a host of negative factors in the broader markets met with waning physical demand in major consumers China and India.

Gold has found good support, however, at the $1,172 level, a chart retracement of its December to July rally.


PG View: Not so much “edging” anymore . . . The yellow metal is gaining momentum in early U.S. trading.

Posted in Gold News, Gold Views |

Gold has caught a bit of a bid, pressuring the high for the week that occurred on Monday, right after the Italian referendum defeat. Silver jumps to 3-week highs, reclaiming 17 handle.

Posted in Gold News, Gold Views, Silver News, Silver Views |

ESM says it is not in talks with Italy over banking loan

07-Dec (Reuters) — The euro zone bailout fund has not received any request and has not discussed with Italy a possible programme of financial support for its ailing banking sector, a spokesman for the fund said on Wednesday.

“There is no request and there are no discussions with the Italian authorities on an ESM loan,” a spokesman for the European Stability Mechanism told Reuters in an emailed statement.


Posted in Europe |

Morning Snapshot

07-Dec (USAGOLD) — Gold is modestly higher within the recent range, buoyed by ongoing concerns over the Italian banking system. Both Italy and the ESM have denied rumors that there has been, or will be, a request for a €15 bln loan to support the teetering banking sector. There have been more concrete rumors yesterday that a state bailout of Monte Paschi could take place this coming weekend.

Light economic calendar in the U.S. with JOLTS job data, EIA oil inventories and consumer credit out later this morning. The RBC also announces policy at 10:00ET. Steady as she goes is expected.

Posted in Gold News, Gold Views, Snapshot |

Gold higher at 1173.67 (+4.00). Silver 16.82 (+0.087). Dollar better. Euro better. Stocks called easier. U.S. 10-year 2.37% (-2 bps).

Posted in Markets |

Michael Lewis on socialism for Wall Street

CNBC/Michelle Fox/12-6-2016

MK note:  This is an interesting video clip – CNBC interviewing “The Big Short” author, the highly-respected Michael Lewis.   Lewis makes reference to the very same problem that Steven Hawking raised in his op-ed in The Guardian over the weekend, i.e., privatizing profits and socializing losses. Socialism for “elite Wall Street guys,” as Lewis calls it.  I am not sure that the Trump administration intends to roll back the Volcker Rule, a worry Lewis expresses in this interview.  In fact, Trump has talked about going the whole nine yards and re-introducing a modern version of Glass-Steagall which, until it was repealed in 1999, kept commercial banks from indulging in the kind of speculative activities that almost brought the house down in 2007-2009. Unless something has drastically changed, Glass-Steagall is the exact opposite of where Lewis thinks Trump stands.  Worth watching. Three minutes and you become a bit more well-informed.


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