Gold | Analysis: Gold Consolidates After Hitting a Record High Close This Week

gary@thegoldforecast.com

5-6 minutes - Source: KITCO

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Hawaii Six O - Gary Wagner - Friday, August 16, 2009.

Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.

Gold pricing consolidated in trading today after market participants took gold pricing to the highest daily closing price this year. As of 4 PM EDT gold futures basis the most active December contract is currently trading down $6.30 (-0.42%), and fixed at $1524.50. The result of this week’s trading even with today’s moderate selloff is that gold has now closed at a new record high for the week. Gold opened on Monday at $1509 per ounce and effectively closed at $1524.50 for a net weekly gain of $15.50.

Last week gold pricing had a sharp price spike as it opened at $1450 and closed at approximately $1508 resulting in a $58 weekly gain and the former record close on a weekly basis. Considering that gold opened at $1314 during the first week of June we have seen the precious yellow metal surge over $200 in the last 2 ½ months.

In fact, since the first week of June market participants have witnessed gold spike higher and enter a period of consolidation that would be followed by another price advance. This pattern of solid price gains followed by periods of consolidation or sideways price action has been a consistent characteristic during the last 2 ½ months.

Because recent price gains in gold have been sharp and dynamic (almost parabolic), which has been followed by sideways price action or consolidation indicates extreme bullish market sentiment and we are not seeing sizable corrections or retracements following the latest price gains. One explanation for this type of price movement is that the underlying fundamentals which have been moving gold pricing higher still remains in play.
It is the trade war between the United States and China that has been the precursor to all of the other fundamentals which collectively have been creating solid and strong bullish market sentiment. First and foremost is the fact the trade war has dampened global economic growth to such a noticeable degree that central banks globally have pivoted from a monetary policy of normalization to that of accommodation. The fact of the matter is that the Federal Reserve and others have reignited a policy of quantitative easing by a series of rate cuts and asset purchases creating monetary liquidity.
While there is no doubt that when these two superpowers come to a mutually acceptable agreement and conclude the current trade war safe haven assets will experience a drop. Up until that point it is highly likely that we will continue to see the basic financial trends that have been evident over the last couple of months continue. These trends include higher safe haven assets like gold, declining yields on bonds and notes, and consistent pressure in the global equities markets.
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Wishing you as always, good trading,

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication. 

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FX | EU Currency: Dollar rises on bullish data, euro's fall

3 minutes - Source: CNBC

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The U.S. dollar has regained some strength in recent weeks.
Getty Images

The dollar rallied on Friday on bullish economic data and hit a two-week high against the euro as expectations of central bank stimulus weighed on the single currency.
U.S. homebuilding fell for a third straight month in July amid a steep decline in the construction of multi-family housing units, but a jump in permits to a seven-month high offered hope for the struggling housing market. Better-than-expected retail sales data in the United States on Thursday also encouraged buying of the dollar.
“Any downturn in the U.S. economy appeared on a further rather than closer horizon after bullish retail spending data this week suggested America’s main growth engine had ample horsepower to extend the record-long expansion,” said Joe Manimbo, senior market analyst at Western Union Business Solutions.
The euro fell 0.14% to $1.109, shy of the two-year low of $1.1025 it reached on Aug. 1. Friday’s fall was caused by growing expectations of an interest rate cut by the European Central Bank after Governing Council member Olli Rehn suggested on Thursday that the central bank could restart its quantitative easing program and was open to extending it into equity purchases.
“Global markets started Friday in a better mood with sentiment boosted by expectations for the European Central Bank to err on the side of bold stimulus as soon as central bankers’ coming meeting on Sept. 12,” said Manimbo.
The biggest move against the dollar was in Norway’s crown, which dropped to more than a 17-year low of 9.0375 against the greenback in early Friday trading.
The crown extended its selloff after the Norges Bank said on Thursday its plan for an interest rate rise this year was now more uncertain.
Norway’s currency has been falling fast since June as the price of oil - its principal export - has tumbled and as fears of weaker global growth and tougher trade relations have weighed on the Norwegian economy.
Measured against a basket of six other major currencies, the dollar was higher by 0.05% at 98.19. It has recovered by 1.25% from its three-week low on Aug. 9.
Data showing U.S. consumers kept spending in July came as a relief after the Treasury yield curve inverted this week, which historically has preceded U.S. recessions.
The inversion stoked worries about the impact of the Sino-U.S. trade war. The curve was slightly steeper on Friday at 4.7 basis points. 

Bonds | U.S. Treasury Yield Report: Treasury yields rebound from historic lows

Sam Meredith, Yun Li

3 minutes - Source: CNBC

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Treasury yields rose on Friday, climbing back from their historic lows hit on Thursday, easing fears a global slowdown could tip U.S. economy into a recession.

U.S. Markets Overview: Treasurys chart

TICKER	COMPANY	YIELD	CHANGE	%CHANGE
US 3-MO	U.S. 3 Month Treasury	1.871	-0.031	0.00
US 1-YR	U.S. 1 Year Treasury	1.712	-0.008	0.00
US 2-YR	U.S. 2 Year Treasury	1.491	-0.005	0.00
US 5-YR	U.S. 5 Year Treasury	1.425	0.003	0.00
US 10-YR	U.S. 10 Year Treasury	1.562	0.035	0.00
US 30-YR	U.S. 30 Year Treasury	2.039	0.059	0.00

The yield on the benchmark 10-year Treasury note, which moves inversely to price, was higher at around 1.588%, while the yield on the 30-year Treasury bond was also higher at around 2.047%.
Yields hit a high after a Der Spiegel article said that Germany would boost spending by issuing more debt.
“In terms of the Germans, what has been brewing is that they are prepared to introduce deficit spending,” said Quincy Krosby, chief market strategist with Prudential Financial. “This is fiscal policy. It’s always been about monetary policy. Now there are discussing fiscal spending. This is a change for them.”
A protracted trade war between the world’s two largest economies and growing fears about a possible global economic slowdown prompted the 30-year Treasury bond yield to fall below 2% for the first time ever in the previous session.
The 10-year note also slipped below 1.5% on Thursday — registering a three-year low.
The benchmark Treasury yield briefly broke below the 2-year rate on Wednesday, flashing a recession warning that send stocks tumbling. As of Friday, the curve steepened and was no longer inverted.
President Donald Trump said Thursday that he believed the U.S.-China trade dispute would be relatively short, adding China wanted to make a trade deal.
“September, the meeting is still on as I understand it, but I think more importantly than September, we’re talking by phone, and we’re having very productive talks,” Trump told reporters on Thursday.
His comments came after Beijing promised it would counter the latest tariffs on $300 billion of Chinese goods but urged the U.S. to meet halfway in order to secure an agreement.
On the data front, housing starts and building permits for July will be released at 8:30 a.m. ET, with consumer sentiment figures for August set to follow slightly later in the session.
There are no major U.S. Treasury auctions expected on Friday.
— CNBC’s Patti Domm contributed reporting.

Markets | U.S. | Dow | Wall Street Closing Report: Dow climbs 300 points as bond yields jump from historic lows

Yun Li U.S. |

4-5 minutes - Source: CNBC

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Stocks rallied on Friday as a rebound in bond yields eased fears of a recession that sent stocks tumbling earlier in the week.
The Dow Jones Industrial Average rose about 260 points, while the S&P 500 gained 1.4% and the  Nasdaq Composite rose about 1.6%. Apple and Nvidia led the gains. The Dow, however, was still on track to lose 1.6% on the week.
Bond yields climbed back from their historic lows on Friday. The U.S. 30-year Treasury yield dropped to a record low on Thursday, while the yield on the benchmark 10-year notes dipped to a three-year low, as investors sought out safe-haven assets.
Bank stocks rallied along with the rise in bond yields on Friday as Bank of America and Citigroup both gained more than 3%. The SPDR S&P Regional Banking ETF is up 2.5%, on track for its best day since June.

The Dow lost 800 points or 3% on Wednesday after the yield on the benchmark 10-year Treasury note briefly broke below the 2-year rate. The inversion of this key part of the yield curve has been a reliable indicator of economic recessions. That part of the curve is no longer inverted Friday and stocks started to move higher as the curve steepened with the rise in yields.
Some traders tied the rebound in bond yields to a report that Germany would issue more debt to stimulate the economy.
“We have been saying this is a buying opportunity and back up the truck,” Tom Lee, Fundstrat Global Advisors’ head of research, said in a note Friday. “But history and even global comparisons show that the S&P 500 should rally. We realize there are many reasons to tilt bearish — don’t forget the White House wants higher stock prices. The Fed does not want stocks to fall. And US consumer may not be paying much attention to inverted yield curves.”
Still, major stock averages are set to post their third straight weekly losses with the S&P 500 down about 1% so far. August has been a volatile and brutal month for the stock market as the Dow has lost nearly 4%.
Markets closed Thursday’s session positively after retail giant Walmart’s strong earnings and solid retail sales figures. The Dow ended its volatile trading day higher by almost 100 points after suffering its worst day of the year on Wednesday.
“Yield curve inversions do not point to imminent doom for U.S. stocks,” Brian Belski, BMO Capital Markets’ chief investment strategist, said in a note. “Historically, it takes a while for big losses to occur once the yield curve inverts.”

The U.S.- China trade war is still a big driver of market movements. President Donald Trump this week decided to delay some of the latest China tariffs to December, a move designed to avoid any negative impact on the holiday shopping season. The president also confirmed the two sides will hold talks next month.
“September, the meeting is still on as I understand it, but I think more importantly than September, we’re talking by phone, and we’re having very productive talks,” Trump told reporters on Thursday.
His comments came after Beijing promised it would counter the latest tariffs on $300 billion of Chinese goods but urged the U.S. to meet halfway in order to secure an agreement.
Chip maker Nvidia’s stock jumped nearly 6% on Friday after it reported better-than-expected fiscal-second quarter earnings. Apple shares gained as investors bought back stocks beaten down by trade war fears.
General Electric, which had its worst day in 11 years on Thursday after accounting fraud claims from Madoff whistleblower Harry Markopolos, rebounded on Friday after CEO Larry Culp called the accusation “market manipulation” and bought nearly $2 million worth of the company’s stock. Shares of GE surged more than 8%.
— CNBC’s Silvia Amaro contributed reporting

Energy I Oil I Oil Price Report I Oil rises alongside equities, but weak OPEC outlook caps gains

3-4 minutes - Source: CNBC

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A Petrobras oil platform floats in the Atlantic Ocean near Guanabara Bay in Rio de Janeiro.
Getty Images

Oil prices on Friday rebounded from a two-day drop, alongside equities as expectations of further stimulus by central banks helped to ease recession concerns.
But oil’s gains were capped after the Organization of the Petroleum Exporting Countries trimmed its global oil demand forecast in a downbeat outlook for the rest of 2019 as economic growth slows. The cartel also highlighted challenges in 2020 as rivals pump more, building a case to keep up an OPEC-led pact to restrain supplies.
“OPEC killed the golden goose,” said Bob Yawger, director of futures at Mizuho in New York. “We’ve had some little rallies back into the green, as market tries to follow equities higher, but the fundamentals in the report are so bearish that it caps the rallies.”
Brent crude was up 32 cents, or 0.6%, at $58.56 a barrel, after falling 2.1% on Thursday and 3% the previous day. U.S. crude rose 4 cents to $54.51 a barrel, having dropped 1.4% in the previous session and 3.3% on Wednesday.
Before the OPEC monthly report release, Brent touched a session high of $59.50 and U.S. crude traded at $55.67 as investors expect further interest rate cuts from the Federal Reserve and moves by the European Central Bank next month to fight softening growth.
For the week, the oil benchmarks were unchanged even as Wall Street’s three main indexes were on track to rack up their third consecutive week of losses, as investors worried about the risk of recession and U.S.-China trade tensions.
BNP Paribas cut its forecast for 2019 for U.S. crude by $8 to $55 per barrel and for Brent by $9 to $62 per barrel, citing slowing economy amid the trade dispute.
Earlier this week, data releases included a surprise drop in industrial output growth in China to a more than 17-year low, and a fall in exports that sent Germany’s economy into reverse in the second quarter.
The price of Brent is still up nearly 10% this year helped by supply cuts led by OPEC and its allies such as Russia, a group known as OPEC+. In July, OPEC+ agreed to extend oil output cuts until March 2020 to prop up prices.
“At what point will further output cuts be needed at the back end of this year from OPEC and Russia to keep things going the way they are?” said Phin Ziebell, senior economist at National Australia Bank.
A Saudi official indicated this month that more steps may be coming, saying Saudi Arabia was committed to do “whatever it takes” to keep the market balanced next year.
OPEC’s efforts have been undermined by worries about the economy , as well as rising U.S. stockpiles of crude and higher output of U.S. shale oil.