As Fed Speeches Dominate, Gold Heads South

This week, speeches of most of the FOMC’s twelve members were scheduled to take place . What can we learn from them? The current week is dominated by the next round of Fed officials’ speeches. Although some of the events – including Yellen’s speech on Thursday – are yet to come, let’s analyze what has already been said. On Monday, Chicago Fed President Charles Evans noted that the economy’s performance might justify three hikes this year, but the Fed might raise interest rates four times, if the economy really takes off (or just twice, if uncertainty increases). On the same day, Dallas Fed President Robert Kaplan said that he would back more interest rate increases as long as the economy saw gains. On Tuesday, Kansas Fed President Esther George pointed out that she needed more details on the Trump administration's fiscal proposals to factor them into her economic forecasts, while the Fed Vice Chairman Stanley Fischer told reporters that the FOMC’s median estimate for three hikes this year seemed about right. On balance, the presented remarks did not bring anything new, as the Fed’s officials reiterated that inflation is on the way to reach Fed’s target, but that many uncertainties remain. However, they reminded investors of rate hike plans. Indeed, the market odds of a June hike increased from 49.6 to 54 percent. The recent economic data could also reinforce the rate hike expectations, as new orders for durable goods increased 1.7 percent in February, while consumer confidence surged in March to a 27-year high. This is why the US Dollar Index edged up yesterday, while gold prices went south. However, the uncertainty about Trump’s policy seems to provide support for the yellow metal. Investors should remember that consumer and business confidence is not hard data, but subjective opinions – for example, confidence was high before the financial crisis. Another example: Markit Flash U.S. Composite PMI Output Index declined from 54.1 in February to 53.2 in March, signaling the slowest expansion of private sector output since September 2016. It seems that the confidence is high due to the elevated expectations about Trump’s economic agenda. Although the new administration is determined to fulfill its promises, the failure of Trumpcare signals that it will not go as smoothly as expected. Anyway, there are still a few Fed speeches left – and they can affect the gold market. Stay tuned! Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.

U.S. jobless claims fall by 3,000 to 258,000 last week

The number of people who filed for unemployment assistance in the U.S. last week fell less than expected, but held near the lowest level since March 1973, underlining optimism over the health of the labor market. The U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending March 25 declined by 3,000 to a seasonally adjusted 258,000 from the previous week’s total of 261,000. Analysts expected jobless claims to fall by 13,000 to 248,000 last week. The four-week moving average was 254,250, up 7,750 from the previous week. The monthly average is seen as a more accurate gauge of labor trends because it reduces volatility in the week-to-week data. Continuing jobless claims in the week ended March 18 rose to 2.052 million from 1.987 million in the preceding week. Analysts had expected continuing claims to inch up to 2.020 million. USD/JPY was at 111.34 from around 111.23 ahead of the release of the data, EUR/USD was trading at 1.0734 from around 1.0743 earlier, while GBP/USD was at 1.2457 from 1.2465. The US dollar index, which tracks the greenback against a basket of six major rivals, was at 100.00, compared to 99.94 ahead of the report. Meanwhile, U.S. stock futures pointed to a slightly lower open. The blue-chip Dow futures shed 16 points, the S&P 500 futures dipped 2 points while the tech-heavy Nasdaq 100 futures fell 5 points. Elsewhere, in the commodities market, gold futures traded at $1,246.70 a troy ounce, compared to $1,249.80 ahead of the data, while crude oil traded at $49.84 a barrel from $49.81 earlier.

Forex - Dollar index holds onto gains after upbeat U.S. data

The dollar remained broadly higher against other major currencies on Thursday, after the release of upbeat U.S. economic growth and jobless claims data added to optimism over the strength of the economy. EUR/USD slipped 0.28% to 1.0735, the lowest since March 21. The dollar was supported after official data showed that the third estimate of fourth quarter gross domestic product was at 2.1%, up from the previous reading of a 1.9% expansion. Analysts had expected a growth rate of 2.0%. Separately, the U.S. Department of Labor said initial jobless claims declined by 3,000 to 258,000 in the week ending March 25 from the previous week’s total of 261,000. Analysts expected jobless claims to fall by 13,000 to 248,000 last week. Meanwhile, the euro remained under pressure after Reuters reported on Wednesday that European Central Bank policymakers are wary of adjusting their policy message in April amid concerns over a potential surge in borrowing costs in the bloc’s periphery. Elsewhere, GBP/USD edged up 0.18% to 1.2457. Sterling initially weakened after British Prime Minister Theresa May formally began Brexit proceedings on Wednesday, launching a two-year negotiation process before the divorce comes into effect in late March 2019. USD/JPY rose 0.24% to 111.33, while USD/CHF held steady at 0.9969. The Australian dollar was little changed, with AUD/USD at 0.7671, while NZD/USD shed 0.24% to 0.7014. Meanwhile, USD/CAD fell 0.11% to trade at 1.3314. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.24% at 100.02, the highest since March 21.

Oil flat as supply glut concerns weigh

Oil was mostly flat Thursday as concerns about a supply glut wiped out earlier gains amid disruption to Libyan output. U.S. crude was unchanged at $49.51 at 08:00 ET. Brent crude shed 10 cents, or 0.19%, to $52.44. The Energy Information Administration reported a lower than expected rise in U.S. crude inventories. Stockpiles still remain at record highs of 534 million barrels. Gasoline stockpiles fell more than expected. Higher U.S. supply and inventories continue to weigh on the market. That is undermining the impact of production cuts by major producers. OPEC and non-OPEC producers are cutting output by 1.8 million barrels a day in the first half. There are expectations the cuts could be extended beyond June.

Gold extends retreat from 1-month highs as dollar gains ground

Gold prices edged lower for a third straight session on Thursday, adding to their decline from a one-month high reached at the start of the week as the dollar strengthened amid expectations for more U.S. interest rate hikes this year. Comex gold futures dipped $3.20, or around 0.3%, to $1,250.50 a troy ounce by 3:00AM ET (07:00GMT). Meanwhile, spot gold was down $2.50 at $1,251.10. Gold hit its strongest since February 27 at $1,264.20 on Monday. Also on the Comex, silver futures for May delivery shed 6.4 cents, or about 0.4%, to $18.18 a troy ounce. In the previous session, the metal touched its highest since March 2 at $18.27. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 99.86 in London morning trade. It rose to an overnight high of 99.99, extending a bounce off a four-and-a-half month low of 98.67 touched on Monday. The greenback was boosted by hawkish comments from a number of Federal Reserve officials on Wednesday, including Chicago Fed President Charles Evans and San Francisco Fed President John Williams. There are three more Fed speakers on the calendar for Thursday. New York Fed chief William Dudley is expected to be the most important, with a 4:30PM ET discussion on financial conditions and monetary policy. San Francisco Fed President Williams speaks at 11AM ET, while Dallas Fed President Robert Kaplan speaks at 3PM in New York. On the data front, investors will have initial jobless claims and the final look at fourth quarter GDP, both released at 8:30AM ET. The Fed raised interest rates earlier this month and stuck to its outlook for two more hikes this year. Fed fund futures priced in around a 50% chance of a rate hike in June, according to Investing.com’s Fed Rate Monitor Tool. Odds of a September increase was seen at about 70%. The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases. Headlines from Washington will also be in focus, as traders await further details on President Donald Trump's promises of tax reform following the House's failure to vote on a plan to replace Obamacare last week. Elsewhere in metals trading, platinum tacked on 0.4% to $959.70, while palladium declined 0.3% to $787.62 an ounce. May copper futures dropped 1.4 cents, or 0.5%, to $2.662 a pound.