Gold sales jump 45% at Austrian Mint thanks to negative rates
Posted onIn the wake of a new analysis from the World Gold Council suggesting that golds price performance can double under negative interest rates comes a Bloomberg report showing a major mints bullion sales are booming. One reason given: negative rates.
Austria’s mint, Muenze Oesterreich AG, which makes the popular gold Philharmonic coins, is reporting that its 2015 sales of gold bars and coins have jumped 45% versus 2014s totals, with 1.32 million ounces moved. Its silver bars and coins did even better, charting a 58.7% rise from 4.6 million ounces in 2014 to 7.3 million last year.
Mint official Andrea Lang cited the European Central Banks negative-interest-rate policy for the sales surge. Interest rates are negative at the moment and people don’t see any benefit of keeping their money anywhere, but at the same time they feel a little bit concerned about the future. They want to invest; they want to have a safe haven for their money, she said Friday.
And in the wake of news that the Perth Mint logged record profits in the second half of 2015, the Australian facility also says its March gold sales rose 29% to 47,948 ounces versus a month earlier.
The U.S. Mint also is seeing robust sales. Although its month-over-month totals for gold American Eagle and gold American Buffalo coins have dipped, gold Eagle sales rose 68.2% in first-quarter 2016 versus the same quarter in 2015. And gold Buffalo sales are 7.1% higher in the first quarter of this year versus the first quarter of 2015.
Meanwhile, silver American Eagle sales are chugging along at a record pace, with more than 14.9 million ounces sold. That’s almost 24% higher than sales for the equivalent period a year ago and 2015 was a record year for silver Eagle sales!
Trump warns of massive recession, but real threat may be 1970s-style stagflation
Posted onRepublican presidential contender Donald Trump grabbed headlines again over the weekend by reiterating one of his campaigns central claims: that the U.S. is in a recession.
Trump may have a point: The Atlanta Federal Reserves GDPNow forecasting tool has now fallen below 1%, to just 0.7%. Though not yet negative, U.S. growth seems to be losing momentum.
I think were sitting on an economic bubble. A financial bubble, Trump told The Washington Post. Were not at 5% unemployment. Were at a number thats probably into the 20s if you look at the real number. That was a number that was devised, statistically devised to make politicians and in particular presidents look good. And I wouldnt be getting the kind of massive crowds that Im getting if the number was a real number.
Im talking about a bubble where you go into a very massive recession. Hopefully not worse than that, but a very massive recession.
Hollow pockets all over economy: Trumps claims brought out the usual naysayer economists in their rose-colored glasses, but the latter are ignoring a crucial point: Though U.S. GDP hasnt fallen into negative territory for the two straight quarters needed to qualify as a true recession, millions of Americans nevertheless feel as if they are living in one.
Trumps not talking to economists, said Yahoo! Finance columnist Rick Newman. Hes talking to a lot of people who feel they have been in a massive recession for years, I mean 15, 20 years. Thats who is showing up to Donald Trumps rallies by and large, and they have reasons to be angry, by and large. We do know that incomes have stagnated for a lot of people. We do know that many of the better-paying blue-collar or middle-income jobs we used to have are no longer here. And when you look at the aggregate data on the U.S. economy, you see growth; you see the economys doing OK, but there are big hollow pockets in the U.S. economy.
And to see those hollow pockets, look no further than last Fridays nonfarm-payrolls report. Although 215,000 positions purportedly were created in March, the unemployment rate ticked up to 5%, and The Wall Street Journal reported that U.S. companies have announced the most first-quarter layoffs since 2009, citing the latest Challenger Gray data.
29,000 factory jobs lost: And a closer look at the Labor Department report itself reveals that the headline numbers are a rickety faade:
29,000 manufacturing jobs were lost in March, along with 12,000 in mining, only to be replaced by record gains in retail, food services, and drinking establishments, or typically low-paying service-industry jobs.
More than 93 million Americans remain out of the labor force. Although the participation rate improved in March, the number of Americans who have given up looking for work is still higher than a year ago.
Moreover, the newly created jobs are not the type that can sustain the American Dream or get deeply indebted college students out from their parents basements. Circumstantial evidence in the latest U.S. jobs report suggests many of these newly employed workers have found part-time work with mediocre pay, MarketWatch said of the payrolls report.
Indeed, the U.S. manufacturing sector remains in a deep funk, with factory orders down 1.7% in February.
Another dismal earnings season ahead: And Trump could be right on another front: the equities bubble. The stock market could be about to get a huge wakeup call in the coming weeks, when corporate-earnings reporting season begins.
Nearly one-fifth of companies on the S&P 500 index expect to fall short of Wall Street estimates in what promises to be one of the most negative earnings seasons in a decade, MarketWatch reported.
With 94 companies already issuing negative quarterly outlooks, thats the second-highest number since tracking began.
And even worse, this will be the fourth straight negative quarter for earnings, with a decline of 8.7% projected, according to one estimate.
How much can the stock market rally in the face of the reality that earnings expectations have been steadily reduced? asked the Financial Times on March 25.
Stagflation leaving tracks across U.S.: With signs of inflation starting to tick up amid this low-growth environment, some economists are beginning to utter the S word: stagflation.
During the last year, as the economy has returned closer to full employment, the core cost structure of the U.S. economy has risen more aggressively and more broadly than ever before in this recovery, Jim Paulsen of Wells Capital Management told clients. While the U.S. is not facing runaway inflation, the concept of stagflation (i.e., rising inflation rates combined with slower real economic activity) has become much more noticeable.
Overall, for the first time in this recovery, a broad and significant rise in core economic costs is slowing job creation, real consumer spending and profitability, Paulsen said. In other words, stagflation is leaving tracks across the entire (economy).
Stagflation last reared its ugly head in the 1970s and coincided with golds run-up to its then-all-time high above $800. Bank of America has issued a report saying that gold is one asset that can thrive during stagflation, and other analysts have concurred.
Stagflation is the toughest investment regime, composed of inflation and economic stagnation, Acernis Capital CEO Avner Mandelman wrote in Canadas Globe and Mail newspaper earlier this year. The last time we saw this was in the late 1970s. And its coming again. In such a period, one of the only investments that appreciates is gold.
Gold and Negative Interest Rates: Protect Your Wealth From the Latest Central-Bank Stickup
Posted onGold expert Jim Rickards the author of several books including Currency Wars, The Death of Money, and The New Case for Gold recently penned a Q&A, and a Blanchard and Company client reacted with a great response. The article was about the amount of money that the Federal Reserve has stolen from American savers, which is approaching $8 billion, according to a recent study by NerdWallet.
Here is the Q&A:
How much did the Fed steal from U.S. savers? $7.5 billion and still counting. When the Federal Reserve keeps interest rates close to zero, who wins and who loses?
The losers are savers like you and me who keep some portion of their assets in the bank.
The winners are the banks that get to use our money for free and make leveraged investments in safe Treasury notes. This homegrown carry trade can produce 15% returns on equity for the banks at our expense. Artificially low interest rates are a case of stealing from savers and transferring the profits to the banks. Its like a bank robbery in reverse, where the bank robs you!
Relative to normal interest rates at this stage of a business cycle, savers have lost over $7.5 billion in interest due to the Feds policies. Some estimates put the losses much higher.
Here’s what a Blanchard client said upon reading the above: Wait until they go negative!
Negative rates seem to be popping up all over the globe as central banks struggle just to keep their respective economies stagnant, much less growing. Most people can’t imagine negative rates happening in the United States, but the Fed is pretty much close to zero interest rates as it is and has no bullets left in its monetary-policy gun.
What are negative interest rates? Its an even more draconian monetary policy than zero interest rates, in which savers receive little to nothing in interest for their bank deposits. Under negative rates, a bank customer actually gets back less than the original deposit; in effect, a depositor pays the bank a fee for the privilege of storing cash at the bank. Negative rates are a last-ditch attempt by central banks to generate inflation and stimulate the economy by forcing people to spend rather than save, since saving becomes a money-bleeding proposition.
The Fed has already reduced its projected number of interest-rate hikes in 2016 by half, from four to two, and as new economic data come in, it will likely reduce that number further. If the economy undergoes any hiccups at all, the Fed will be forced to reverse its December rate hike its first in almost a decade and be right back at zero, with a negative-interest-rate policy (NIRP) looming on the horizon.
Gold is an excellent asset to hold during both ZIRP and NIRP environments. The dollar will weaken, and virtually no safe asset will offer a rate of return. Investors will start looking for the return of their money, not a return on their money. What happens when you give a bank $100 on deposit but get only $98 back when you return for your money? The power of gold during negative rates is that it offers a better chance at a yield than cash or bonds, which are money losers under NIRP.
$1,350 gold is next, firm says after bullions best quarter since 1986
Posted onGold on Thursday sealed the deal on its best quarterly price performance since 1986.
Though Asian demand has played a significant role in the metals breakout performance this year, Western investors surprisingly provided the spark that gold needed as they sought safe-haven shelter from volatility on the stock market and concerns over Chinas slowdown.
Holdings in ETFs rose 21% to 1,761.3 metric tons in the period, the biggest gain in any quarter since the three months ended March 2009, Bloomberg reported. At the same time, trading volumes on the largest futures exchange, the Comex in New York, reached 14.1 million contracts, a record for a first quarter.
Now that first-quarter 2016 is history, some experts are weighing in on what the rest of the year holds. One of the major precious-metals consultancies, Metals Focus of London, thinks this quarters rally has legs.
30% gain from December 2015 low: Changing expectations towards the outlook for U.S. interest rates, concerns about monetary policy elsewhere, as well as turbulent equity and bond markets, have re-kindled institutional investor interest in the metal, said its director, Nikos Kavalis.
This impressive recovery will mark the end of the bear cycle that started in late 2011. Further gains later in the year are forecast to see gold peak at $1,350 by end-2016, almost 30% higher than its December 2015 low.
And count Investec Asset Management as a true believer in golds rebirth. We believe that this years upturn in gold has fundamental support and, whilst early, does appear to be the start of a longer-term rally for the sector, it wrote, citing limited scope for further Fed rate hikes, strong emerging-market demand, and equity-market turbulence.
Another metal consultancies are less bullish but nonetheless say gold likely has bottomed. Acknowledging bullions blistering start to 2016 based on a variety of global macroeconomic concerns, GFMS nonetheless foresees another pullback this year, largely based on the argument that current market turbulence will start to ease.
GFMS sees improving fundamentals: Though predicting that gold might drop below $1,200 this year, GFMS tempered that outlook by saying bullion will find support due to the improving market fundamentals, namely, supply and demand.
On the supply side, we forecast global mine production to drop in 2016, representing the first annual decline since 2008 and the largest in percentage terms in more than a decade. While we expect a modest recovery in scrap volumes, particularly from markets where the gold price is not expressed in dollar terms, this is unlikely to offset losses in global mine production, thus resulting in lower total supply.
By contrast, we expect physical gold demand to improve later in 2016, particularly for investment-grade jewellery, triggered by a rebound in pent-up demand from Asia. This is likely to be driven by concerns about the slowdown in China, heightened uncertainty in currency markets, particularly in emerging economies, and a growing desire to diversify personal wealth. Moreover, a clear uptrend in the gold price or, at least, signs of stabilisation are likely to see investors returning to the market and gold regaining its lustre. The forecast reduction in global mine output and a gradual recovery in demand will see the physical surplus narrow in 2016, providing support to the gold price and laying the foundation for better prospects.
Economic concerns to resurface: And CPM Group also sees gold maintaining strong support even if it does pull back, before rebounding toward 2017. CPM President Jeff Christian says easing fears about the global economy could take gold back down to $1,170 or even $1,130.
Our expectation is that the gold price comes down over the next two quarters second and third and by the end of year starts rising again as investor concerns of the economic outlook for 2017 starts to take hold again, he said.
Double down on gold thats what negative rates mean, WGC says
Posted onNegative interest rates have been called a game changer for gold investing, and now a new report from the World Gold Council (titled Gold in a world of negative interest rates) has reaffirmed that standpoint.
Recently introduced in Japan and already in full sway in much of Europe, negative rates take zero interest rates a step further by in effect imposing storage fees on bank depositors. The result is that cash sitting in a bank or parked in a government bond becomes an automatic losing proposition, while golds primary caveat the fact that it has no yield virtually disappears.
Because of this new and unprecedented phase in monetary policy, the World Gold Council concludes that investors should consider doubling their gold allocations amid negative interest rates.
4 reasons gold demand will rise: The WGC lists four reasons why demand for gold as a portfolio asset will structurally increase.
- Gold becomes cheaper to hold when rates are negative;
- many assets that fund managers normally would choose, such as sovereign bonds, become money losers when yields are negative;
- as a key tool in global currency ways, negative rates further undermine confidence in fiat money; and
- negative rates are an admission that more mainstream monetary-policy tools have failed, and the effects of negative rates are uncertain at best.
Although negative-interest-rate policies have never been common as official doctrines, the WGC has studied several periods in which real interest rates have been negative, and the effect on gold has been tremendous.
Gold returns twice as high: What is a real interest rate? Its calculated by subtracting the inflation rate (as measured by the Consumer Price Index) from the Feds official interest rate (in this case represented by the 12-month constant maturity T-bill).
Under real negative rates, gold has thrived. When real rates are negative, gold returns tend to be twice as high as the long-term average, the council concluded.
Negative rates thus bolster the case for gold, most importantly for central banks, which already have been on a bullion-buying tear for about the past decade. Because these banks usually invest in a more limited set of assets, gold becomes an even more solid investment.
The prolonged presence of low (and now even negative) rates has fundamentally altered the way investors should think about risk and may result in a broader use of assets like gold to manage their portfolios more effectively and preserve their wealth over the long run, the WGC report said.
Gold key as Fed risks overshooting inflation target
Posted onInflation is still by no means going gangbusters, but nascent signs that prices are starting to rise should have investors thinking about gold as a portfolio hedge.
Crude oil has rallied by about 50% since its February lows; the S&P/Case-Shiller housing-price index posted a 5.7% rise in January; and the Consumer Price Index for February showed that core inflation (minus food and energy costs) increased by 2.3% year-over-year for a post-Great Recession high. The 2% threshold is key because thats the Federal Reserves stated inflation target.
Several regional presidents of the central bank have been warning of rising prices, most recently John Williams of the San Francisco branch, and their caveats on inflation have become all the more imperative given Fed Chairwoman Janet Yellens overtly dovish speech before the Economic Club of New York on Tuesday.
The recent data reinforce my expectation that inflation is on track to move back to 2% over the next two years, Williams said in Singapore this week.
Oil could light inflationary fire: Some big investment firms also are issuing analyses urging clients not to underestimate inflation. It is naveto ignore the potential risk that themarket could be surprised by higherinflation rates, wrote Investec Asset Managements Philip Saunders.
Our modelssuggest inflation and wages will befirm going forward and our commodityteam believes that robust oil demandand a material decline in oil supply willprovide support to the oil price.
If thereis a more sustained oil price recovery,consistent with our commodity teamsforecast of approximately US$60 perbarrel, there is a meaningful risk thatinflation could even overshoot to theupside.
Gold, TIPS for diversifiers: And the Pacific Investment Management Co., or PIMCO, also told its clients that inflation could be back on the move, with strategist Anthony Crescenzi recommending Treasury Inflation-Protected Securities, or TIPS, to offset rising prices. Markets are not fully priced for this reflation idea, he said.
But TIPS arent the only weapon against inflation. Capital Economics has attributed golds 16% rise this year at least partially to growing inflation expectations.
BlackRock also thinks gold is a good bet. Stabilizing oil prices and a tighter labor market could contribute to rising actual, and expected, U.S. inflation, said its global chief investment strategist, Richard Turnill. We like inflation-linked bonds and gold as diversifiers.
Stagflation nightmare ahead?: Of course, there is another potential end result besides inflation or deflation (recession), and thats stagflation, in which rising prices co-exist with slow growth and high unemployment. The U.S. suffered from stagflation in the 1970s, and certain similarities exist between then and now.
For one, U.S. growth is relatively stagnant, stuck in the 2% range or even lower, according to the latest quarterly forecast from the Atlanta Fed. And while the official unemployment rate is 4.9%, the labor-participation rate is near record lows, with 102.5 million working-age Americans currently lacking a job.
Stagflation is on the radar of Bank of America, which recently issued a note saying clients should at least prepare for that eventuality.
While it is not our base case, investors may want to hedge the tail risk of the economy experiencing elements of stagflation realized as rising inflation during stagnating growth, noted BofAs global rates and currencies research team.
Gold outperforms in stagflation: So how should investors prepare for this eventuality? MarketWatch wrote in summarizing the note. According to Bank of Americas historical analysis of market trends, gold, oil and U.S. Treasurys tend to outperform during periods of stagflation, while equities tend to underperform.
So equity bulls, beware: If first-quarter GDP disappoints, as Bank of America expects, one might want to consider buying gold or Treasurys as a hedge.
Given that several current U.S. GDP estimates are running at under 1%, maybe Bank of America is onto something. In any case, should the Fed err and overshoot its 2% inflation target, investors might be happy that they prepared with gold and silver bullion plus rare coins.
Gold goes on fresh rampage as Yellen doubles down on dovishness
Posted onGold rebounded from one-month lows Tuesday after Federal Reserve chief Janet Yellen pulled off the unthinkable: issuing an even more dovish speech to the Economic Club of New York than her comments after the Feds March meeting.
Earlier Tuesday, an S&P/Case-Shiller housing-price index got the ball rolling for gold by posting a 5.4% increase for the 12 months ended in January. Why was gold affected? Because rising home prices are the latest indicator that inflation is surfacing in the U.S., and gold is a traditional inflation hedge.
Then Yellen began her speech, and it appears that even the Fed chief herself doesnt know when the next interest-rate hike could be coming. Only gradual increases in the federal funds rate are likely to be warranted in coming years due to economic uncertainties, she said.
Proceed cautiously, Yellen says: Her dovish message flew in the face of recent hawkish comments by several Fed presidents urging more tightening this year.
I consider it appropriate for the committee to proceed cautiously in adjusting policy, Yellen said, citing risks from global developments. This caution is especially warranted because, with the federal funds rate so low, the FOMCs ability to use conventional monetary policy to respond to economic disturbances is asymmetric.
Although Yellen didnt discuss negative interest rates as a potential policy tool, she hinted that more quantitative easing might be on the table if necessary, saying the Fed could increase the size or duration of our holdings of long-term securities.
While these tools may entail some risks and costs that do not apply to the federal funds rate, we used them effectively to strengthen the recovery from the Great Recession, and we would do so again if needed, she said.
Yellen unsure if inflation has legs: One of those risks is inflation, and on that subject Yellen was vague in commenting on the recent uptick in the core Consumer Price Index. It is too early to tell if this recent faster pace will prove durable, Yellen said.
Yellen has doubled down on the dovishness from the March statement and press conference, Neil Dutta of Renaissance Macro Research told Bloomberg. Global economic developments are cited very prominently.
As a result, gold soared 1.4% to hit $1,238, up from Mondays one-month low near $1,208. In late-afternoon trading the price had topped $1,240. Meanwhile, silver was up 0.7% at $15.326 and moving higher in after-hours trading.
“It looks like we may be pricing back in just one interest rate hike. That’s why we’re rallying,” Phillip Streible of R.J. O’Brien told Reuters, while Warwick Valley Financial Advisors President Ken Ford told MarketWatch, From a longer-term-trend perspective, gold may have turned the corner.
Time will tell whether gold can maintain Tuesdays advance, but with the central bank already crawfishing on its rate-hike pace, the odds are with the yellow metal.
China, Russia see golds seasonal pullback as buying opportunity
Posted onTo be honest, gold hadnt done much since flirting with the $1,270 level a couple of weeks go. But investors with any sense of golds seasonal patterns will know that March historically has never been a strong month for the yellow metal.
Why? Because the Asian holiday buying that traditionally propels gold higher in January and early February tends to wane after the Lunar New Year holiday, which the Chinese celebrate by purchasing huge quantities of gold jewelry, bars, and coins. This years Lunar New Year peaked on Feb. 8, around the same time that the U.S. stock market hit its lows for the year.
Strong spring rally ahead?: Lunar New Year gold buying is what U.S. Global Investors CEO Frank Holmes has described as The Love Trade, in which gold is accumulated for its festive attributes. Other Love Trade periods include the end of Ramadan in Muslim cultures; Indias Diwali festival; and Judeo-Christianitys Christmas and Hanukkah traditions.
With the Lunar New Years Love Trade over for 2016, accompanied by some renewed momentum in U.S. stocks, its no surprise that gold has eased back from its highs. And yet it remains up about 17% and is still one of this years best-performing assets.
March usually vies with June for the worst month in terms of gold-price performance. Writing about mining equities, Adam Hamilton of Zeal Research might just as well have been speaking of gold bullion when he noted, The red-hot gold stocks have spent most of March in consolidation mode, grinding sideways near their 2016 highs.Interestingly this months rally pause is par for the course seasonally in gold-stock bull markets.Like gold itself, this sector tends to slump to a seasonal low in mid-March before embarking on a strong spring rally in April and May.
Strongest February on record: This correction should not be unexpected, therefore. There are certainly reasons to think that gold could correct, wrote noted gold expert Adrian Day. After all, we have seen a very strong rally, with the strongest February on record; it would be foolhardy to expect that to continue without a pause. The first quarter is seasonally strong, with the April to June period typically soft. Moreover, the speculative net-long positions on the COMEX have increased vastly in recent months, and thus are vulnerable to profit taking.
In fact, current bearish commercial positioning on the gold futures market suggests that further weakness could lie ahead.
Given golds huge bull-market resurgence in 2016 and its well-known seasonal pullback pattern, what should investors do now? Buy the dips, of course. Low interest rates, a dovish Federal Reserve, a peaking dollar, stock-market volatility, and ongoing inflows into precious-metals ETFs all suggest that gold could be set to resume its run higher on any number of catalysts.
I suspect there will be a pullback in the weeks ahead, but it is likely to be shallower and shorter than normal seasonal corrections, certainly than those of the past couple of years, Day added. And after this pullback, gold will recover to move higher this year. We have seen the lows in the long gold bear-market (or super-cycle bull correction, which is how I prefer to view it).
China, Russia seize the dip: Investors around the globe with a longer-term view are indeed buying the pullbacks. The Wall Street Journal just published a March 28 story titled Chinese investors see golden opportunity.
Chinese investors have been snapping up gold bars and coins, overshadowing the usual purchases of gold jewelry and contributing to the metals price rise of 16% from six-year lows in December, it reported. The uncertainty confronting global economies has driven up demand from a different sort of buyer the hard-nosed investor.
Moreover, mainland Chinas bullion imports from Hong Kong are showing signs of recovery.
Russia also is buying on the sovereign level, with the IMF reporting that Moscows central bank bought 356,000 ounces of gold in February to become the largest buyer of the precious metal among the world’s central banks, according to RT.
Silver ETF inflows at 2-year highs: Silver ETF inflows also remain strong despite the slowdown in the metals sector. Investors are buying silver through funds at the fastest pace in more than two years even as prices drop to the lowest in almost a month, Bloomberg reported.
Holdings in silver-backed exchange-traded products jumped 845.6 metric tons in March, heading for the biggest monthly increase since August 2013.
Longer-horizon investors might do well to stick with the same philosophy of buying low now to bank on higher returns later. Though no guarantee of future price performance, golds past seasonal patterns confirm that we shouldnt be surprised by its current pullback nor by more moves higher as the year progresses.
GDP forecasts crumble after weak spending report crushes growth expectations
Posted onU.S. growth cheerleaders dodged a bullet last week when the Commerce Department upwardly revised its fourth-quarter GDP estimate from 1% to 1.4%. But the outlook for the current quarter took a sharp downward turn with Mondays release of new spending and trade data.
Despite a strong pending-home sales number and a Dallas Fed manufacturing report that hit its least-negative level since November, consumer spending rose by an anemic 0.1% in February, with Januarys figure also revised downward, the Commerce Department reported. Consumer spending is huge for the U.S. economy because it comprises about two-thirds of all economic activity.
Meanwhile, the Personal Consumption Expenditures price index (PCE), which is the Federal Reserves preferred inflation gauge, fell short of the central banks 2% inflation target for the 46th straight month.
Atlanta Fed cuts target to 0.6%: Combined with an advance report forecasting a widening U.S. trade deficit in February, the upshot of the new Commerce data is that numerous firms are downgrading their GDP forecasts for first-quarter 2016.
Most notable among them is the Atlanta Federal Reserve branch, which slashed its target by more than half!
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 0.6% on March 28, down from 1.4% on March 24, the Atlanta Fed noted.
Huge payrolls report Friday: Its next GDP update will be April 1, which also happens to be when the Labor Department releases its bellwether nonfarm-payrolls employment report for March.
Other firms also followed suit, but not quite as deeply at the Atlanta Fed. A CNBC/Moodys Analytics estimate pegged growth at just 0.9%, down from an earlier target of 1.4%. Macroeconomic Advisers on Monday estimated GDP at 1%, down from an earlier prediction of 1.5%.
Other forecasters: Amherst Pierpont, 0.6%, down 0.9% from its earlier target; Moodys Analytics, 0.8%, down 0.6%; Action Economics, 1.0%, down 0.4%; and Goldman Sachs, 1.7%, down 0.4%.
Pessimism over business profits: And even before the latest spending and inflation numbers, pessimism about U.S. and corporate growth prospects was increasing. Economists surveyed by the National Association for Business Economics reduced their median 2016 growth forecast for business profits from 5% to 2%, The Associated Press reported.
The survey also found that most economists have lowered their outlooks for economic growth in 2016, and now expect that the U.S. will grow 2.2% this year, on average, it added. Thats down from a December prediction of 2.6% growth. The survey also found that 79% of economists lowered their growth outlook for 2017.
And as a result of these GDP downgrades, the Fed likely will feel increasing pressure to slow the pace of its interest-rate increases, already projected at just two this year after it had announced in December a possible four hikes during 2016.
Weakening momentum: It speaks to the weakening in domestic economic momentum at the start of this year, further reinforcing the Feds cautious monetary-policy bias, TD Securities economist Millan Mulraine told Reuters.
Conventional wisdom holds that gold tends to do better in low-interest-rate environments; thus, if the slowing U.S. economy means that the Fed likely will be letting rates stand pat rather than hiking, the yellow metal should find further support.
For more clues on the Feds direction, stay tuned for a speech by Chairwoman Janet Yellen on Tuesday, as well as separate public appearances by a host of Fed officials this week. Also set for release Friday is the all-important March jobs report, which could be a gigantic market mover given that GDP expectations have tumbled so dramatically.
Gold consolidates as Fed slashes GDP forecast to measly 1.4%
Posted onIn the wake of a Federal Reserve meeting last week that Goldman Sachs characterized as the most dovish in years, several of the banks regional presidents have made hawkish public statements this week. The end result: The dollar has strengthened, and gold has fallen back to one-month lows near $1,220.
St. Louis Fed chief James Bullard declared that an interest-rate hike could be on the table at the April meeting, while new Philadelphia branch President Patrick Harker said that we need to get on with it.
Recession-like data piling up: These hawkish messages just a week after the Fed scaled back its rate-hike pace from four to two led CNBC to wonder whether Fed Chairwoman Janet Yellen might have a mini revolt on her hands.
But the new tough talking on rate hikes looks all for naught. Fresh home-sales data out Wednesday suggest the real-estate market is losing momentum; while a contractionary Markit services PMI report issued Thursday shows that the U.S. economy is going through its worst growth spell for three and a half years … and the worst may be to come as the greatest concern is the near-stalling of new business growth. And even more devastating was a February durable-goods orders report that dropped 2.8%, down for the third time in four months, with core orders extending a 13-month losing streak the longest streak in the history of the series with no recession, Zero Hedge noted.
Gradual pace to support gold: As a result, the Atlanta Fed was forced to downgrade its projection for U.S. growth, putting current GDP at 1.4%, down from an earlier 1.9% estimate. Is declining growth the type of environment in which the Fed can afford to hike rates?
The conflicting back-and-forth among Fed officials appears to be just more razzle dazzle. The Fed comments put a bit of pressure on the gold price but are unlikely to derail a more positive long-term sentiment towards the metal, ABN Amros Georgette Boele told Reuters. If there was a massive rate hike and a jump in the dollar, it would be very difficult for gold to move higher, but any rate increase will be gradual.
ETF holdings still at 2-year highs: Although the media pundits are calling golds drop this week a sign that bullions momentum is fading, the statistics tell otherwise. Bloomberg reported that money is still flowing into gold ETFs and that holdings remain near two-year highs. Its peculiar that ETFs were net buyers even as prices dropped, but the narrative has shifted and remains more supportive for gold, said Bernard Dahdah of Natixis SA.
And on the physical side, Australias Perth Mint, which manufactures the popular gold Kangaroo coin and other bullion products, just reported record profits for the past half year.
Kiyosaki touts gold, silver as shelter: Its only natural that gold prices might dip and consolidate after a roughly 20% run-up in the first two months of the year. The current pullback represents a buying opportunity, and for famed Rich Dad Poor Dad author Robert Kiyosaki, precious metals offer protection from the 2016 crash that he predicted back in 2002. Were right on schedule, he told MarketWatch in a recent interview.
Kiyosaki wrote in 2002 that the initial wave of retiring baby boomers would strain the retirement system by taking their first required distributions this year en masse.
Kiyosaki is sticking to his guns, saying that Chinas current financial crisis, as well as the Feds trillions in quantitative easing, have set up the conditions for a larger collapse.
The financial expert is urging investors to build a financial ark with gold and silver because the Fed will be forced to print even more money to prop up the markets.
The recent dip back into the $1,220 range for gold (and near $15.20 for silver) offers a tactical opportunity for investors to build the financial ark that Kiyosaki is recommending. HSBC is predicting $1,300 gold by years end, while other analysts see the price going as high as $1,450. Buy low now to sell higher later.
