“Waiting too long to begin moving toward the neutral rate could risk a nasty surprise down the road – either too much inflation, financial instability, or both,” Yellen said in remarks prepared for delivery to the Commonwealth Club of California in San Francisco.
“In that scenario, we could be forced to raise interest rates rapidly, which in turn could push the economy into a new recession.”
USAGOLD/Peter A. Grant/01-18-17
Gold is trading modestly lower on the day, but remains generally well bid within the uptrend that has emerged since gold bottomed late last year. The yellow metal is being weighed by a firmer dollar, but haven interest is limiting the downside.
Gold has risen for seven consecutive sessions. There’s still a lot of trading day left, so we could still see and eighth today.
CNBC reports that GLD has risen 13 out of the last 15 sessions through yesterday. That’s something that hasn’t happened since the summer of 2011.
After holding steady on policy today, Bank of Canada Governor Stephen Poloz warned that rate cuts were still on the table, citing “significant uncertainties.” Poloz specifically mentioned “material” risks to the Canadian economy if U.S. trade policies become more protectionist under President Trump.
Silver has gotten a lift this week as well, regaining the $17 level for the first time since mid-December and setting a 9-week high yesterday at 17.32. The technical picture for silver has improved markedly this week, with the 100-day moving average now within striking distance at 17.53.
FT/Sam Fleming and Shawn Donnan/01-17-17
Donald Trump has threatened to overturn two decades of US economic policy by questioning the strong value of the dollar, raising fears that his presidency could set off a new round of currency wars between the world’s major economies.
On Monday the president-elect appeared to break from the longstanding “strong dollar” policy of successive administrations, declaring that the currency was too high and that this was preventing US companies from competing with Chinese counterparts. “It’s killing us,” he said in an interview with the Wall Street Journal.
PG View: Let’s be honest, our so-called “strong dollar” policy has been a farce. The greenback is in long-term secular decline, like pretty much every other fiat currency. Only within the last several years has the dollar really appreciated; largely as a result of divergent monetary policy. Those gains are eroding the competitiveness of U.S. corporations, which will likely put trade policy high on the Trump administration’s agenda. Speaking in Davos, an advisor to the President-elect, suggest Mr. Trump is likely to tear-up the rulebook on trade.
Bloomberg/Thomas Seal and Ranjeetha Pakiam/01-17-17
Bullion has risen every day except one in 2017, evidence that investors are pricing in a rocky year ahead. U.K. Prime Minister Theresa May confirmed Tuesday that she’ll leave the European Union’s single market while seeking a new arrangement on the customs union. Donald Trump is just three days away from being sworn in as the next U.S. president.
“As the inauguration of Trump draws close, I think people are realizing that potentially this could be a very stormy presidency and gold may well benefit from that,” said David Govett, an analyst at Marex Spectron Group Ltd. in London. “There is new money at the beginning of each year looking for a home and a lot of this seems to find its way into gold.”
PG View: Gold is slightly lower this morning as recent gains are consolidated, we’ll have to wait and see where we close today.
Gold prices could extend their gains after Donald Trump’s inauguration if he continues to make statements as president that prompt investors to enter safe havens.
As president-elect, Trump has angered China, India and Mexico, some NATO countries and, just this long weekend, Germany (over its luxury cars), to name a few. Gold prices in New York trading have risen 11.9% since Nov. 8.
However, the assumption is that once Trump takes office, he will either be more restrained or advisers around him will dampen whatever he says. Based on Trump’s more than two dozen tweets since Saturday, there is a high probability that that assumption is wrong.
PG View: Whether you find President-elect Trump’s unvarnished candidness refreshing or troubling, now may be a good time to bolster your gold holdings.
USAGOLD/Peter A. Grant/01-18-17
Gold is generally consolidative at the high end of the recent range. The dollar is a little firmer today, which has the yellow metal trading slightly lower in the day.
December CPI was inline with expectation. Later this morning we have industrial production, NAHB housing market index, Beige Book, TIC data and FedSpeak from Yellen and Kashkari.
The Bank of Canada will also announce policy. Steady as she goes is widely expected.
Financier Anthony Scaramucci, an adviser to Donald Trump, has been speaking at the World Economic Forum in Davos, Switzerland.
He said President-elect Trump is likely to tear up the old rulebook of how trade deals are done and although he wants a strong relationship with countries like China, is seeking changes to what he called “asymmetrical deals” that have been struck in recent decades.
PG View: That ought to shake things up globally . . .
“Long gold: ‘Our sense is that Mr. Trump doesn’t hold any core policy beliefs and is apt to change his mind as he sees fit. This will lead to more political and economy uncertainty,’ which is positive for gold, according to Einhorn.”
MK note: The “Long gold” is wedged-in among the ever-present list of stocks and sector plays. Einhorn is a long-time gold advocate owing to discussions he had with his grandfather when he was a youngster – discussions that stuck even after he became a fabled money manager.
USAGOLD/Peter A. Grant/01-17-17
Gold surged to fresh 8-week high as the dollar took a double hit: One from President-elect Trump and one from a sharp rebound in the British pound. The yellow metal is now up more than 5.5% YTD, and more than 8% from the December low.
The dollar index tumbled to a six-week low after President-elect Donald Trump told the Wall Street Journal that the dollar was “too strong.” So, what might the new President do about that?
That question should give dollar bulls pause. As I stated in this morning’s Snapshot, perhaps the easiest first step would be to appoint a couple doves to the two open seats on the Fed’s board of governors. That could disrupt the expectations of two or three rate hikes this year, pushing the dollar lower in the process. That would bode well for gold.
Today’s rebound in Sterling put further pressure on greenback. The pound rallied nearly 3% versus the dollar and almost 3% against the euro. While PM Theresa May confirmed there would be a hard-Brexit, the currency rebounded in classic ‘sell the rumor, buy the fact’ fashion. Ms. May confirmed that her government would be aggressively looking to strike the best trade deals possible and Parliament will get to vote on any deal struck with the EU. That all seemed to offer some level of relief to markets, but this is still going to be a cumbersome process fraught with risk.
Those Brexit risks, along with Mr. Trump’s penchant for shooting from the hip will likely keep markets on edge for the foreseeable future. Gold should then continue to benefit from safe-haven flows.
Market jitters sent precious metals soaring, with silver futures briefly touching their highest level since the Federal Reserve’s decision to raise interest rates on December 14.
The March contract for silver rose 23 cents, or 1.4%, to $17.00 a troy ounce at 7:49 am ET. It had reached an earlier high of $17.13 a troy ounce.
In a Friday interview with The Wall Street Journal, Trump said the U.S. currency, which touched a more-than 14-year high about two weeks ago, has gotten “too strong,” especially considering the China’s yuan is “dropping like a rock.” “Our companies can’t compete with them now because our currency is too strong. And it’s killing us,” he told WSJ.
Trump’s remarks about the dollar underscore the soon-to-be president’s unconventional political style, and could threaten to roil stocks, which have enjoyed a healthy run higher in recent months. Sitting presidents rarely offer their direct view on the strength or weakness in U.S. currency for fear of influencing the market.
PG View: Today’s weakness in the dollar has pushed gold to an 8-week high and silver is back above $17 for the first time in 5-weeks.
USAGOLD/Peter A. Grant/01-17-17
Gold continues to charge higher, buoyed larger by renewed weakness in the dollar. The yellow metal has pushed to a new 8-week high of 1218.90. Silver has reclaimed the 17-handle.
In a Wall Street Journal interview, President-elect Trump said the dollar was “too strong,” adversely impacting the ability of U.S. companies to compete globally. Mr. Trump seemed to be particularly concerned about the Chinese yuan “dropping like a rock.” Unvarnished rhetoric like that ought to strike fear in the hearts of dollar bulls and monetary policy hawks alike.
Easier policy is a sure-fire way to knock the dollar lower. There are two vacant seats on the Federal Reserve Board of Governors that President Trump will be able to fill immediately and they will presumably contribute to the shaping of monetary policy moving forward.
The dollar was further weighed by a rebound in the British Pound in the wake of Theresa May’s Brexit speech. While there will apparently be a hard-Brexit, assurances that Britain was not turning inward and that Parliament will get to vote on any deal struck with the EU seemed to temper pessimism somewhat.
Theresa May has said the UK “cannot possibly” remain within the European single market, as staying in it would mean “not leaving the EU at all”.
But the prime minister promised to push for the “greatest possible” access to the single market following Brexit.
…And Mrs May promised an end to the UK’s “vast contributions” to the EU.
But Labour said there were “enormous dangers” in the prime minister’s plans.
PG View: Sterling rebounded, encouraged by Ms. May’s assurances that Britain was not turning inward and that Parliament would get to vote on any deal stuck with the EU.
Bloomberg/Thomas Seal and Ranjeetha Pakiam/1-17-2016
“As the inauguration of Trump draws close, I think people are realizing that potentially this could be a very stormy Presidency and gold may well benefit from that,” said David Govett, an analyst at Marex Spectron Group Ltd. in London. “There is new money at the beginning of each year looking for a home and a lot of this seems to find its way into gold.”
USAGOLD note: Trump calls US$ “too strong” in WSJ interview released late last night. Presidential advisor Scaramucci at Davos conference says “we must be careful of a rising dollar.” CNBC cites safe-haven buying on “hard Brexit.” Gold is up 5.8% in 2017; 7.8% from December cyclical low ($1128). It was up 8.7% in 2016. See chart below for annual returns since 2001.
For more detailed information: The Gold Owner’s Guide to 2017.
The Hill/Justin Haskins/01-14-17
The current economic picture looks eerily similar to the one in 2008: Economic growth is sluggish, personal debt is extremely high, the government is running massive annual deficits, and riskier investments are being encouraged by the current market conditions, although this time it’s being caused by excess cash in the monetary supply.
President-elect Trump enters the White House at a crucial moment in U.S. history. If the economy does not grow rapidly in the coming years, allowing market distortions to correct and the Fed to safely increase interest rates to bring the monetary supply back to its historical norm, there could be another large-scale economic collapse in the not-so-distant future.
The Week UK/01-16-17
Reports indicate that Theresa May will tomorrow signal the UK is to quit the European single market when it leaves the EU. This has worried the markets, with traders concerned about the destabilising consequences for the UK, EU and, ultimately, the world’s economies.
PG View: Gold surged back above £1000, setting a 10-week high of £1006.73.
Gold briefly touched “an eight-week high of just shy of $1,210 per troy ounce as the new week of trading gets underway,” said Commerzbank analysts in a note. “This is due among other things to strong statements made by U.S. President-elect Donald Trump just a few days before his inauguration, and to new developments with regard to Brexit.”
Bloomberg/Natasha Doff and Eddie Van Der Walt/1-12-2016
“Baring’s Mahon, who bought his exposure through ETFs, says that while 2017 is a watershed, his conviction on the politicization of central banks is one that will play out over several years, making gold a safe bet for the long term.”
USAGOLD/Peter A. Grant/01-16-17
Gold rose in overseas trading to set a new 8-week high of 1208.58, despite a higher dollar this morning. The yellow metal remains underpinned by safe-haven demand, amid uncertainty ahead of the Trump inauguration and rising concerns over a hard-Brexit.
U.S. markets are closed today in observance of the Martin Luther King Jr. holiday. Look for trading activity to be muted after the European close as a result.
Bloomberg/Svenja O’Donnell and Timothy Ross/1-15-2017
“Government officials expect sterling to take another hit when May sets out her vision for leaving the bloc in a speech on Tuesday, and the Treasury is preparing to speak to major banks in London to try to smooth the reaction, said the people, who declined to be named as the plans aren’t public. While Treasury officials often reach out to banks to explain policy, it’s unusual for the prime minister’s office to anticipate a bad market reaction, they said.”
USAGOLD note: Gold upside originating in Asian trading as of this writing. China New Year physical demand also a factor.
by Michael J. Kosares
1. Don’t buy it because you need to make money; buy it because you need to protect the money you already have.
2. Don’t look at price as a barrier; look at it as an incentive.
3. Don’t buy its paper pretenders; buy the real thing in the form of coins and bullion.
4. Don’t fall prey to glitzy TV ads; do your due diligence instead.
5. Don’t allow naysayers to divert your interest; allow yourself the right to protect your interests as you see fit.
Mr. Kosares is the author of The ABCs of Gold Investing – How To Protect and Build Your Wealth with Gold, the widely-read introduction to gold ownership.