The Daily Market Report: Gold Well Bid Heading Into Weekend

USAGOLD/Peter A. Grant/03-24-17

Gold is heading into the weekend trading slightly higher on the day and just off the three week high set yesterday at 1253.31. The yellow metal is presently up 1.8% on the week and appears poised for a second consecutive winning week.

Focus remains on Capitol Hill, where passage of the GOP’s healthcare bill remains very much in doubt. President Trump has reportedly asked for a vote today regardless, but I suspect Republican leadership is loath to risk such a defeat this early in the Trump administration.

However, even if they go back to the drawing-board to attempt more palatable legislation, it would suggest to markets — especially stocks — that the Trump agenda is probably way overbought. If stocks roll-over, gold will likely benefit from continued safe-haven flows.

“We should see some safe haven flows into gold if [Trump] can’t get it passed because it means all his other programs have a low probability of succeeding.” Societe Generale’s Robin Bhar

If the reflation trade is suspended, one has to wonder how the Fed will react. FedSpeak today continues to be rather optimistic, but I suspect they were actually hoping for a little fiscal help this year. If those hopes are diminished on the healthcare reform flop, the central bank may have to take a more dovish stance to ward off a stock market collapse and possibly even recession.

The Atlanta Fed’s GDPNow model now projects 1.0% growth in Q1. While that’s slightly better than the 0.9% forecast from March 16, it is hardly reflective of the “good clip” referenced by NY Fed President Dudley today.

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

GOP Leaders Not Confident They Have Votes to Pass Health Bill

Bloomberg/Billy House, Sahil Kapur & Anna Edgerton/03-24-17

House GOP leaders aren’t confident they have enough votes to pass their embattled health-care bill, according to a senior congressional aide, and are already considering what to do if the measure is blocked before a do-or-die vote hours away.

House Speaker Paul Ryan arrived at the White House Friday to brief President Donald Trump ahead of the vote. Vice President Mike Pence canceled a trip to Arkansas to be in Washington for the vote, a White House official said.

The Trump administration is doubling down on its demand that House Republican leaders hold a vote Friday on their embattled health-care bill without any changes and with an influential GOP member saying he’s not sure they have the votes.

Posted in Politics |

Markit flash manufacturing PMI fell to 53.4 in Mar, vs 54.2 in Feb; services 52.9, vs 53.8 in Feb.

Posted in Economic Data |

Gold set for second weekly gain, eyes on U.S. healthcare vote

Reuters/Peter Hobson/03-24-17

Gold was on track for a second weekly gain on Friday as concern about the ability of U.S. President Donald Trump to push legislation through Congress held the dollar near 7-week lows, making bullion cheaper for holders of other currencies.

Spot gold was up 0.1 percent at $1,245.53 an ounce at 1131 GMT. The metal has risen 1.4 percent this week and on Thursday touched $1,253.12, its highest since Feb. 28.

…Gold, seen as a safe haven asset, has benefited from falls in the dollar, U.S. bond yields and stocks as Trump’s difficulty in passing healthcare reform has undermined faith that he can deliver on promises of tax cuts and investment.

Posted in Gold News, Gold Views |

Obamacare repeal vote too close to call

Politico/Kyle Cheney, Rachael Bade & John Bresnahan/03-24-17

President Donald Trump’s ultimatum to Republicans to overturn the Democratic health care law they’ve been campaigning against for years heads to the House floor Friday for a momentous showdown that will test the GOP’s ability to govern.

And no one, not even the people in charge of counting the votes, can say what will happen.

Posted in Politics |

Morning Snapshot: Gold remains firm at high end of recent range

USAGOLD/Peter A. Grant/03-24-17

Gold corrected modestly overseas before returning to unchanged on the day. The yellow metal appears poised to score a second consecutive higher weekly close on a weaker dollar and worries that healthcare reform may stall the broader Trump agenda.

GOP leadership opted not to put AHCA to a vote in the eleventh-hour yesterday because they didn’t seem to have the votes. They’ll try again today, but considerable doubts remain as to whether the votes are there.

The gold market seems nonplussed by the February durable goods orders. Later this morning we’ll see Flash Markit manufacturing and services PMI. FedSpeak is due from Evans, Bullard and Dudley today.

Posted in Gold News, Gold Views, Snapshot |

U.S. durable goods orders +1.7% in Feb, above expectations of +1.2%, vs positive revised +2.3% in Jan.

Posted in Economic Data |

Gold steady at 1245.64 (-0.09). Silver 17.65 (+0.049). Dollar lower. Euro higher. Stocks called higher. U.S. 10-year 2.41% (unch).

Posted in Markets |

Fed economists’ study warns of future episodes of ultra-low rates

FT/Sam Fleming/03-23-17

Even as US rate-setters make tentative progress in the direction of more normal monetary policy, economists are warning that central banks are set to find themselves with official interest rates stuck back down at near-zero levels dispiritingly often in the future.

A study to be presented at the Brookings Papers conference this week by two Federal Reserve Board economists finds that rates could hit zero as much as 40 per cent of the time – far more often than predicted by other studies.

PG View: This could explain why the Fed is raising rates into economic weakness, just so they have some room above the zero-bound and don’t have to go negative.

Posted in Central Banks, Monetary Policy |

The Daily Market Report: Gold Underpinned as Focus Shifts to AHCA Vote

USAGOLD/Peter A. Grant/03-23-17

Gold remains generally well bid, although earlier tests above important resistance at 1250 have faltered. While continued weakness in the dollar should limit the downside in the yellow metal, a bit of a reprieve in the stock market is probably limiting the upside.

Everyone is keyed on the AHCA House vote today as a proxy for President Trump’s broader reflation agenda. The feeling being that as goes the AHCA vote, so goes deregulation, tax reform, trade deals and fiscal stimulus. Pretty much everything that had markets so excited in the wake of last November’s election results.

The best case is that the reflation trade gets delayed for some period of time as the GOP sorts out their differences on healthcare. The worst case would be a complete derailing of the Trump agenda.

The biggest casualty of such an outcome would probably be the stock market, which went from bubbly to positively frothy in recent months. We have already seen risk appetite dissipate this week, to the benefit of Treasuries and gold as safe haven buying ramped up. If AHCA fails to clear the house, those trends are likely to accelerate.

The most recent speculation suggest somewhere between 27 and 32 Republican representatives are either hard “no”, or leaning “no”. If accurate, AHCA will not pass. Rather than allowing that to happen, leadership would likely postpone the vote in the hope of building additional support.

However, that too would be seen as a negative outcome. Stocks would likely fall. Treasuries would rally, pushing yields lower. That would put additional pressure on the dollar. All of that would be positive for gold.

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

U.S. new home sales +6.1% to 592k in Feb, above expectations of 565k, vs positive revised 558k in Jan.

Posted in Economic Data |

Gold’s Six-Day Winning Streak Ranks as Best Gain Since Brexit

Bloomberg/Eddie Van Der Walt/03-22-17

Gold prices are steadily climbing as equities retreat and concern deepens among investors that Donald Trump won’t deliver on pro-growth promises for the U.S. economy.

Bullion for immediate delivery has gained more than 4 percent in six days, heading for the biggest advance since the aftermath of the Brexit vote in late June.

Posted in Gold News, Gold Views |

Fed’s Yellen does not comment on monetary policy

Reuters/Lindsay Dunsmuir/03-23-17

Federal Reserve Chair Janet Yellen did not address monetary policy or the economic outlook in prepared remarks for a childhood education conference in Washington on Thursday.

The two-day conference which she was introducing is focused on how to educate children and young adults for future success in employment.

Yellen is not scheduled to take any audience questions, according to the conference agenda.

PG View: This will free markets to continue on their post-FOMC trajectories. Good for gold.

Posted in Central Banks, Monetary Policy |

Gold Price Rally Continues as Global Markets Wobble

TheStreet/Paul Whitfield/03-23-17

Gold has gained more than 2% since mid-March as economic fundamentals lined up to support a rally, and could be poised to gain again on Thursday if The Trump administrations reforms are rattled by a failure to push through plans to repeal and replace the Affordable Care Act.

Gold traded early in Europe’s session at €1,156.54 ($1247.30) in line with its Wednesday close and in relatively flat trading on Europe’s major markets. The metal is up 2.3% since March 14, the day before the Federal Reserve set up the rally by hiking interest rates but damped expectation of future increases by declaring that U.S. monetary policy will remain supportive for “some time.”

Posted in Gold News, Gold Views |

Morning Snapshot: Gold pushes to new 3-week highs on continued dollar weakness, jobless claims miss

USAGOLD/Peter A. Grant/03-23-17

Gold continues to track higher, establishing new three-week highs in the wake of this morning’s bigger than expected jump in initial jobless claims. With the dollar still under pressure, focus now shifts to the February high in the yellow metal at 1263.87.

Also on the calendar today is February new home sales and FedSpeak from Janet Yellen. However, the day’s big event will be the initial House vote on the new healthcare bill.

Despite the solid GOP majority in the House, infighting among Republicans makes passage questionable at best. If the AHCA fails to clear the House on this vote, there are legitimate worries that the entire Trump agenda will stall.

Posted in Gold News, Gold Views, Snapshot |

Gold higher at 1249.38 (+3.16). Silver 17.02 (+0.105). Dollar soft. Euro lower. Stocks called higher. U.S. 10-year 2.41% (+1 bp).

Posted in Markets |

The Daily Market Report: Gold Edges Higher as “Reflation Trade” Seen in Jeopardy

USAGOLD/Peter A. Grant/03-22-17

Gold is edging higher, setting new three-week highs above 1250.00. U.S. yields are under pressure, which is dragging the dollar lower as well. Stocks remain defensive after dropping sharply on Tuesday.streaming movie Split

As investors pare their optimism on the great Trump reflation, one must wonder what they were really wishing for in the first place. The Fed has been trying to reflate the economy via extraordinary measures for nearly a decade, largely with little to no impact. That may have been because the central bank was getting no help on the fiscal side of the equation.

The election of Donald Trump, along with GOP majorities in both houses of Congress, triggered expectations that the long awaited fiscal stimulus was on its way. Those expectations have been tempered recently as initial efforts by Republicans to amend healthcare legislation may not have the necessary votes to clear the House tomorrow. Gennadiy Goldberg of TD Securities argued that such an event would spark “a significant risk-off event.”

The concern is that if healthcare gets bogged down, the broader reflation agenda is going to be delayed as well. Gold typically fares quite well in a risk-off environment.

But even if the reflation is successful, what will be the cost? The U.S. is currently $20 trillion in debt; that’s more than twice the $9.2 trillion national debt of a decade ago. “There is practically no chance that debt will stabilize or decrease,” wrote Gary Christenson for Sprott Money. Christenson suggests that devaluation of the dollar is the only option. Historic precedent is certainly on his side.

Debt will increase, currencies will devalue, and central banks will “print” to keep the financial systems moving and markets rising, if they can. How much more debt can the system accommodate? — Gary Christenson

That’s a good question. And he’s not just talking about America. Debt is on the rise the world over. It’s like we learned absolutely nothing from the financial crisis, which at its core was a debt crisis. In the subsequent years, governments just borrowed more to paper over the problems of the past. That can only go on so long.

Gold is the ideal hedge, whether we get the much anticipated inflation, or continued disinflation. Christenson thinks prices will bubble higher, “sooner rather than later.”

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

UK parliament in lockdown after terror incident

FT/Jim Pickard, Helen Warrell & Caroline Binham/-3-22-17

Britain’s House of Commons was suspended on Wednesday afternoon after a shooting incident at the entrance to Parliament, soon after a car mowed down a number of pedestrians on adjoining Westminster Bridge.

The UK police said they were treating it as a terrorist incident until they know otherwise.

Posted in all posts |

Reflation Trade Hangs in the Balance as Health Care Vote Looms

Bloomberg/Luke Kawa, Sid Verma & Felice Maranz/03-22-17

Analysts are zeroing in on the House of Representatives vote on the American Health Care Act as a linchpin for President Donald Trump’s ability to push through pro-economic growth policies — and the market’s ability to cling to a faltering reflation trade.

A House divided over the repeal and replacement of former President Barack Obama’s Affordable Care Act — enshrined as the Trump administration’s top legislative priority — faces an uphill battle, reckon Wall Street analysts. Failure to reform could extend the sell-off that pushed the S&P 500 lower by drop more than 1 percent Tuesday for the first time since Oct. 11 as investors pared back bets that the administration will spark growth with tax cuts and infrastructure spending.

Thursday’s vote may be a “key litmus test” for the administration, said TD Securities fixed income strategists led by Gennadiy Goldberg, arguing that its failure in the House would spark “a significant risk-off event.”

PG View: Gold tends to shine in “risk-off” events.

Posted in Politics |

Peak Gold – Biggest Gold Story Not Being Reported

GoldCore, via GoldSeek/03-22-17

We have written about ‘peak gold’ and the ramifications of the underappreciated peak gold phenomenon for the gold market since 2008. The risk of falling gold production and a consequent reduction in supply are slowly percolating into the mainstream and analysts are asking whether 2015 or 2016 marked the year of peak gold production.

Byron King has written about this increasingly important supply factor in the gold market and brings together the views and research of Glencore CEO, Ivan Glasenberg, Thomson Reuters GFMS and others.

PG View: Goldman Sachs reports that “the collapse in South African gold production is the ‘classic canary in the coal mine’ and likely foreshadows the coming decline in global gold production.”

Posted in Gold News, Gold Views |

U.S. existing home sales -3.7% to 5.48M pace in Feb, below expectations of 5.58M, vs 5.69M in Jan.

Posted in Economic Data |

Gold hits 3-week peak as investors shun equities on Trump worries

Reuters, via CNBC/03-22-17

Gold strengthened on Wednesday, with the price touching its highest in three weeks as the dollar languished near six-week lows and bond yields sank on uncertainty over the economic policies of U.S. President Donald Trump.panduan android

…The lack of a concrete policy from the Trump administration is increasing gold’s attraction as a safe-haven investment, analysts and traders said.

“It seems that equity investors decided to take some money off the table, perhaps getting slightly wary about the progress in President Trump’s legislative agenda,” INTL FCStone analyst Edward Meir said.

Posted in Gold News, Gold Views |

U.S. FHFA home price index unch in Jan at 242.6, below expectations of 243.6; +5.7% y/y.

Posted in Economic Data |

Morning Snapshot: Gold remains firm

USAGOLD/Peter A. Grant/03-22-17

Gold remains well bid near three-week highs. The yellow metal remains underpinned by a weaker dollar, lower yields and defensive stocks.

On top of last week’s less hawkish than expected Fed, concerns continue mounting that the new healthcare bill might not fair so well when it faces its initial House vote tomorrow. If the AHCA stalls, the worry is that the rest of the Trump administrations agenda will bog down as well. Stocks in particular don’t seem to like that prospect.

The MBA mortgage market index fell 2.7% last week as rates rose into the FOMC meeting. The January FHFA home price index and February existing home sales are out later this morning.

Crude oil remains under pressure after a sizable API stock build. EIA data are out later this morning. If the OPEC production cut inspired rally is over and lower prices are in the offing, inflationary pressures that the Fed has been touting may fail to materialize.

Posted in Gold News, Gold Views, Snapshot |

U.S. MBA mortgage market index -2.7% for the week ended 17-Mar; purchases -2.1%, refis -3.3%.

Posted in Economic Data |

Gold steady at 1245.19 (-0.90). Silver 17.52 (-0.056). Dollar steady. Euro lower. Stocks called lower. U.S. 10-year 2.41% (-1 bp).

Posted in Markets |

Record Number of Fund Managers Say U.S. Equities Are Overvalued

Bloomberg/Julie Verhage/03-21-17

Measures of stock valuation have been flashing caution for months. Humans are finally starting to take notice.

Fund managers now say stocks are the most overvalued they have been in nearly 20 years, according to a survey done last week by Bank of America Merrill Lynch.

PG View: With the DJIA off about 250 points, stocks are ever-so-slightly less overvalued today. And gold and silver remain very undevalued.

Posted in Markets |

The Daily Market Report: Gold Jumps as Dollar, Stocks and Yields Fall

USAGOLD/Peter A. Grant/03-21-17

Gold is extending to the upside, boosted by a falling dollar, stocks and yields. The 61.8% retracement level the decline from the February high — mentioned in this morning’s Snapshot — has been exceeded, lending additional confidence to the rebound that commenced with last week’s Fed decision.

There seems to be mounting concern that the GOP’s Obamacare repeal and replacement plan may stall in Congress, which in turn may derail the broader reflation agenda of the Trump administration. Republicans made significant amendments to the bill yesterday, hoping to shore up support within their own party. Obviously there will be little to no support from the other side of the aisle.

President Trump was on Capitol Hill today encouraging Congress to pass the AHCA so that he and they can move on. The market seems to be losing some of the confidence that built in the wake of Trump’s February 28th speech to a joint session of Congress. If Thursday’s House vote reveals a fractured majority party, quote a bit more of the post-election stock rally could be vulnerable to retracement as trade deals, deregulation, tax reform and infrastructure spending get backburnered until healthcare is sorted out.

FedSpeak from KC Fed President Esther George wasn’t terribly hawkish. She acknowledged that low rates can lead to imbalances, although she apparently didn’t mention anything specifically (like stocks!). Nonetheless, her softer tone and the fact that she tempered balance sheet normalization expectations is probably contributing to pressure on yields and the dollar.

Minneapolis Fed President Neel Kashkari took to Twitter in an #AskNeel segment, where he continued to defend his decision to dissent on last week’s rate hike:

I agree with him, that higher rates is not going to help the economy grow faster. In fact, GDP data for Q4-16 and Q1-17 seem to suggest higher rates are weighing on growth. That shouldn’t surprise anyone.

Kaskari also suggested that inflation is “much more likely” to be below 2%, noting that the Fed has “powerful tools to keep inflation from getting too high.” He also warned that when “inflation takes off, terrible economic outcomes” ensue.

Our own Mike Kosares wrote a stellar piece early in the month with the subtitle: Don’t look now but inflation and a new gold rush might be in our future. It is a must read and is linked below.

Will banks’ excess reserves fuel a new monetary crisis?

The prospect of the banks unleashing from $12 trillion to $36 trillion in currency and easily accessed deposits — presently held as excess reserves with the Fed — on the economy has got to keep a guy like Kashkari up at night . . .

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

Gold climbs near a 3-week high as dollar drops

MarketWatch/Myra P. Saefong & Mark DeCambre/03-21-17

Gold prices headed higher Tuesday, as the U.S. dollar declined, especially against the euro, as traders eyed the presidential race in France and the U.K. prepared its exit from the European movie The Lego Batman Movie 2017 now

“The political uncertainties over in Europe around French elections and Brexit are going to provide a lot of tailwinds for the gold rally,” said Naeem Aslam, chief market analyst at Think Markets.

Posted in Gold News, Gold Views |

Gold jumps to 3-week highs above $1240, as dollar index falls below 100.0 for the first time in 6-weeks.

Posted in Gold News, U.S. Dollar |