Gold prices attempt to snap 4-session skid

MarketWatch/Myra P. Saefong & Rachel Koning Beals/02-15-17

Gold prices tilted higher Wednesday, attempting a rebound after a four-session fall, but the gains looked vulnerable as the U.S. dollar and bond yields strengthened in the wake of hawkish comments from Federal Reserve Chairwoman Janet Yellen on the nation’s interest-rate picture.

…Gold traders listened closely to Tuesday’s testimony from Yellen, and “she confirmed what we have been noticing—that inflation pressures are increasing, which would warrant an acceleration of the rate hike cycle,” Nico Pantelis, head of research at Secular Investor, told MarketWatch.

Pantelis said he believes this is actually “very bullish for gold, as the price also shot up during the last rate-hike cycles.”

Posted in Gold News, Gold Views |

Gold returns to $1225, about where it was before today’s first raft of data and $10 off the intraday low.

Posted in Gold News |

U.S. business inventories +0.4% in Dec, in line with expectations, vs upward revised +0.8% in Nov; sales +2.0%.

Posted in Economic Data |

U.S. NAHB housing market index fell to 65 in Feb, vs 67 in Jan.

Posted in Economic Data |

Here Is How the Federal Reserve Could End the Bull Market in Stocks

TheStreet/Scott Gamm/02-15-17

The Federal Reserve is stuck in a major pickle — and it’s not about how many times to raise interest rates this year.

The problem stems from years and years of asset purchases — known as quantitative easing. Under the program, the Fed purchased bonds and mortgage-backed securities from banks in the years following the 2008 financial crisis, hoping the companies would use the cash to lend money and stimulate the economy.

PG View: When the Fed ultimately moves to start unwinding its $4.5 trillion balance sheet it could prove incredibly disruptive to markets. And what do you suppose are the odds of another crisis hitting before the balance sheet is fully unwound? I’d say very high as this is likely to be multi-decade process.

Posted in Central Banks, Monetary Policy, QE |

US industrial production falls by most since September

FT/Mamta Badkar/02-15-17

US industrial production unexpectedly shrank in January declining by the most in four months.

…The decline could signal that manufacturing — which, has in the past been weighed down by the strength in the US dollar and a slump in crude prices — is losing momentum again.

PG View: And the dollar is back on the rise amid heightened rate hike expectations.

Posted in Economic Data, Economy |

U.S. industrial production -0.3% in Jan, below expectations of unch, vs negative revised +0.6% in Dec; cap use slips to 75.3%.

Posted in Economic Data |

Consumer prices post largest gain in nearly four years

Reuters/Lucia Mutikani/02-15-17

U.S. consumer prices recorded their biggest increase in nearly four years in January as households paid more for gasoline and other goods, suggesting inflation pressures could be picking up.

…Inflation is trending higher as prices for energy goods and other commodities rebound as global demand picks up.

PG View: And what is the preferred hedge in times of inflation? Gold of course . . .

Posted in inflation |

Morning Snapshot: Gold retreats on upbeat U.S. data

USAGOLD/Peter A. Grant/02-15-17

Gold has come under selling pressure following a round of generally upbeat U.S. economic data upped the prospects for a March rate hike. The yellow metal slipped below support at 1218.40/1217.51 before stabilizing somewhat.

The initial indication of hotter inflation provided yesterday by PPI did indeed carry over to consumer prices in January. CPI came in at +0.6%, twice expectations of +0.3%. Core came in at +0.3% on expectations of +0.2%.

Retail sales bested expectations in January at +0.4%, versus expectations of +0.1%. December was revised to +1.0% from +0.6% previously. The NY Empire State index surged to 18.7 in February, well above expectations of 7.0, versus 6.5 in January.

Janet Yellen testifies before the House later this morning. Her testimony yesterday before the Senate was interpreted as being rather hawkish. Today she has additional evidence that bolsters the case for another rate hike, perhaps as soon as the March FOMC meeting.

Yields are on the rise, bolstering the dollar and giving stocks pause. And yet there are still plenty of uncertainties out there as well — political, geopolitical and economic in nature — that just might give the Fed pause.

Posted in Gold News, Gold Views, Snapshot |

Gold comes under heavier pressure after upbeat data bolster possibility of March rate hike.

Posted in Gold News, Gold Views |

NY Empire State index surged to 18.7 in Feb, above expectations of 7.0, vs 6.5 in Jan.

Posted in Economic Data |

U.S. CPI +0.6% in Jan, above expectations of +0.3%, vs +0.3% in Dec; +2.5% y/y. Core +0.3% on expectations of +0.2%; +2.3% y/y.

Posted in Economic Data |

U.S. retail sales +0.4% in Jan, above expectations of +0.1%, vs positive revised +1.0% in Dec. Ex-auto +0.8% on expectations of +0.4%.

Posted in Economic Data |

Gold easier at 1224.93 (-3.64). Silver 17.85 (-0.103). Dollar higher. Euro lower. Stocks called mixed. U.S. 10-year 2.48% (+1 bp).

Posted in Markets |

Greece is as sick as ever and its agony goes on and on

FT/Tony Barber/02-13-17

In May, Greece will start its eighth year as a patient in the hospital for financially wounded eurozone countries. Having joined Europe’s currency union in January 2001, and having received the first of three rescues worth a combined €260bn in May 2010, the country is on course for a fourth aid transfusion next year. Barring wholly improbable changes in the politics of European crisis management, Greece will earn the unwanted distinction by late 2019 of having spent more of its eurozone existence in an intensive care unit than outside.

Posted in European Debt Crisis |

Week in Review (Video) – February 14, 2017

Posted in USAGOLD TV |

The Daily Market Report: Gold Gives Back Early Gains as Yellen Strike a More Hawkish Tone

USAGOLD/Peter A. Grant/02-14-17

Gold rose initially on Tuesday after an indication of higher inflation. However, these gains could not be sustained as Janet Yellen continued to beat the drum of multiple rate hikes this year.

January PPI came in a +0.6%, twice expectations of +0.3%. Core was +0.4% on expectations of +0.2%. Higher energy prices were cited as the primary driver and we’ll find out tomorrow if these same forces carried through to consumer prices. CPI is expected to show a 0.3% gain in January, with core rising 0.2%, when the data are released tomorrow morning.

Gold gained on PPI data, but retreated when Janet Yellen suggested in testimony before the Senate Banking Committee that it would be unwise to wait too long before raising rates again. The suggestion was that March is on the table, but the market seems to think June is the more likely reality.

“As I noted on previous occasions, waiting too long to remove accommodation would be unwise.” — Janet Yellen

Ms. Yellen expressed some degree of caution though, adding that “considerable uncertainty attends the economic outlook,” citing “possible changes in U.S. fiscal and other policies.” In essence, everything could change based on the fiscal policy agenda pursued by the Trump administration.

The generally hawkish tone pushed yields higher and the dollar index reached new 4-week highs. U.S. stocks dipped and then recovered as the prospects for a corporate tax cut seems to outweigh tighter monetary policy at this point. We’ll see how that plays out if the dollar recovers further.

As for Ms. Yellen’s optimism, I redirect you to yesterday’s DMR, where we talked about anemic growth. When Yellen said the rate hike this past December was justified because of an improving economy, she seemed to be ignoring the rather significant growth slowdown seen in Q4-16.

We’ll wait and see how this all reconciles in the weeks and months ahead. However, there is still enough uncertainty out there to keep the gold market underpinned.

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

Yellen flags up ‘considerable’ uncertainty over US fiscal policy

FT/Shawn Donnan/02-14-17

The US economy and fiscal policy face an uncertain path under the administration of Donald Trump, Janet Yellen warned on Tuesday as she played down any expectations of a March rate rise and reiterated that “monetary policy is not on a preset course”.

…That improving economic picture, she said, justified December’s move by the Fed to raise interest rates for only the second time in the past decade and expectations that it would have to continue to increase its target rate gradually in the months to come.

PG View: The alleged improving economic picture late last year seems not to be reflected in GDP, which fell to a 1.9% pace in Q4, vs 3.5% in Q3. That means that overall growth in 2016 was just 1.6%.

Posted in Central Banks, Monetary Policy |

Gold gives back earlier gains as Yellen warns that waiting too long to hike again would be unwise.

Posted in Gold News, Gold Views |

Morning Snapshot: Gold rises on inflation worries

USAGOLD/Peter A. Grant/02-14-17

Both gold and silver are back on the rise this morning, buoyed by heightened inflation expectations. The yellow metal has exceeded yesterday’s high at 1218.40 and silver has probed back above $18.

January PPI came in at +0.6%, double expectations of +0.3%. Core PPI was +0.4%, also double expectations. Higher energy prices are being cited as the primary driver. CPI comes out tomorrow.

When inflation expectations — and inflation itself — are on the rise, investors turn to gold as means of preserving purchasing power. It also arguably bolsters the case for additional rate hikes, but as we discussed in yesterday’s DMR, growth remains sluggish.

Investors will be watching Janet Yellen’s testimony later this morning, and again tomorrow. There is also FedSpeak from Kaplan and Lockhart today.

Posted in Gold News, Gold Views |

U.S. PPI +0.6% in Jan, above expectations of +0.3%, vs negative revised +0.2% in Dec; +1.6% y/y. Core +0.4%, on expectations of +0.2%; +1.2% y/y.

Posted in Economic Data |

Gold higher at 1233.70 (+7.11). Silver 18.01(+0.158). Dollar lower. Euro higher. Stocks called mixed. U.S. 10-year 2.43% (unch).

Posted in Markets |

The Daily Market Report: Gold Weighed by Higher Stocks, But Growth Risks Underpin

USAGOLD/Peter A. Grant/02-13-17

Gold is maintaining a corrective to consolidative tone after failing to sustain Friday’s rebound in the face of continued stock market gains. Shares remain buoyed by President Trump’s promise that he will announce something big with regard to corporate taxes in the weeks ahead.

The trending stock market is certainly no reason to eschew one’s hedges. In fact, the current political and geopolitical environments are seen as key underpinnings to the gold market.

Data out this week are likely to reinforce rising concerns about inflation, which should also help support gold. While this is exactly what the Fed has been striving for, that it is now coming without the support of wage or economic growth should raise concerns.

In an article published last week on the St. Louis Fed’s website, entitle Why Does Economic Growth Keep Slowing Down?, the author points to weak productivity and capacity utilization.

The U.S. economy expanded by 1.6 percent in 2016, as measured by real gross domestic product (GDP). Real GDP has averaged 2.1 percent growth per year since the end of the last recession, which is significantly smaller than the average over the postwar period (about 3 percent per year). — Fernando Martin, Senior Economist, St. Louis Fed

Aside for a very minor turn higher in Total Factory Productivity, the above chart doesn’t show any real indication that things are starting to turn around. And Mr. Martin notes that the 1.6% annualized growth in 2016 is well below even the weak average over the past 8-years.

Sort of makes you want to look at the recent stock market performance with some degree of suspicion. I wonder whether the anticipated corporate tax cut will do anything to improve productivity, capacity utilization, or wages for that matter . . .

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

It’s no flash in the pan; stay long on gold: UBS

CNBC/Huileng Tan/02-12-17

A rally in gold prices has room to run on risk concerns from politics to interest rates, so hold on to those long positions, a UBS analyst said Monday.

“There’s plenty of uncertainty out there,” said the bank’s commodity and Asia-Pacific commodity head, Dominic Schnider. Top among consideration is the pace of interest rate hikes from the Federal Reserve, he added.

“Inflation is going to accelerate faster than the Fed is going to hike rates; that’s good for real assets. On top of it, we are looking for weak dollar on broad basis; that combination has a good tendency to boost prices,” he told CNBC’s “Squawk Box.”

Posted in Gold News, Gold Views |

Higher dollar and equities weigh on gold

Reuters, via YahooFinance/Pratima Desai/02-13-17

Gold prices slipped on Monday as the dollar rose and equities climbed, but political and economic uncertainties in the United States and Europe are expected to continue to give underlying support for now.

…”Support for gold because of politics will hold this side of the French election,” said Danske Bank analyst Jens Pederson.

“Le Pen’s comments on euro membership are very much on the radar. The UK vote to leave the EU and Trump’s election were unexpected … Investors will lean towards safe assets.”

Posted in Gold News, Gold Views |

Morning Snapshot: Gold slips back toward Friday’s corrective low

USAGOLD/Peter A. Grant/02-13-17

Gold came under renewed pressure in early U.S. trading, falling back to the low end of the recent corrective range. The global risk-on trade continues to buoy stocks, even with Japan’s Q4 GDP miss. U.S. shares still seem optimistic on President Trump’s promised “big news” on the corporate tax front.

I will tell you though that America’s biggest creditors aren’t dumping bonds because they suddenly have a higher risk appetite (see the Bloomberg article posted earlier this morning). They are ditching Treasuries because they sense there are heightened risks in the U.S. that are going to continue to weigh on bonds.

There is nothing on the U.S. calendar today, but the rest of the week is quite busy. Highlights include January PPI tomorrow and January CPI, retail sales and industrial production on Wednesday. Janet Yellen also appears before Congress on Wednesday.

Posted in Gold News, Gold Views, Snapshot |

Japan’s GDP disappoints

BusinessInsider/David Scutt/02-13-17

Japanese economic growth slowed sharply in the final three months of 2016, according to data released by the government on Monday.

The economy grew by 0.2% in the December quarter, missing expectations for an increase of 0.3%.

The slowdown also appears to be part of a broader theme, having grown by 0.6%, 0.4% and 0.3% in the previous three quarters.

Posted in Economy |

America’s Biggest Creditors Dump Treasuries in Warning to Trump

Bloomberg/Brian Chappatta/02-13-17

In the age of Trump, America’s biggest foreign creditors are suddenly having second thoughts about financing the U.S. government.

In Japan, the largest holder of Treasuries, investors culled their stakes in December by the most in almost four years, the Ministry of Finance’s most recent figures show. What’s striking is the selling has persisted at a time when going abroad has rarely been so attractive. And it’s not just the Japanese. Across the world, foreigners are pulling back from U.S. debt like never before.

PG View: I’ve got news for the Fed: Another 25 bps, or even 75 bps, are unlikely to change their minds.

Posted in Debt |

Gold lower at 1226.80 (-6.65). Silver 17.89 (-0.057). Dollar easier. Euro lower. Stocks called higher. U.S. 10-year 2.44% (+3 bps).

Posted in Markets |

A discreet crossroads for the world’s gold Nguyen/2-10-2017

“As a result, the customs office did not include in the export tallies the more than 2,000 tonnes of gold worth CHF80.5 billion that it said were “exported” in 2016, just slightly more than the Swiss pharma trade’s exports. By comparison, the Swiss gold export was roughly equal to Sri Lanka’s entire annual GDP in 2015 and accounts for about four-fifths of all the gold that the world extracts in a year (about 2,500 tonnes).”

MK note:  Remarkable. We’ve written extensively about the London-Zurich-Hong Kong-Shanghai gold pipeline.  These statistics demonstrate the breadth and depth of the physical gold market.  The ultimate source is London-based gold ETFs and London’s bullion banks.  The reason for the stop in Switzerland on the way to the East is to reconfigure the large 400-troy ounce LBMA good delivery bars to the 32.15 ounce kilo bars traded on the Shanghai and Hong Kong gold exchanges.

Posted in all posts |