Gold has traded between $1,308 and $1,331 so far today on “Super Wednesday” for central banks (Japan and the U.S.)…as of 9:30 am Pacific, bullion is up $13 an ounce at $1,327…Silver has jumped 48 cents to $19.68…Copper is off 2 pennies at $2.14…Crude Oil has surged $1.04 a barrel to $45.09 while the U.S. Dollar Index is off one-fifth of a point at 95.78…
Japan’s central bank had its turn at the plate this morning and managed to give Gold a nice lift (thank you very much)…while not introducing any new stimulus measures and maintaining its negative 0.1% interest rate, the BOJ announced a refocusing of its policies, saying that it would concentrate on “yield curve control” with a focus on government 10-year bonds…
On deck is the Federal Reserve with a fresh statement and new projections for interest rates and the economy at 11 am Pacific…Fed Chair Janet Yellen will then brief the media starting 30 minutes later…
Market odds of a rate hike for this meeting were about 20% yesterday (20% too high), and close to 60% for December…there’s no way the risk adverse Fed will hike rates today after the very mixed economic data of recent weeks…given the Fed’s thinking, however, the language in the statement could be hawkish in order to prepare the market for a possible rate increase in December (there is no meeting next month, and November’s Fed meeting comes just a week before the U.S. elections)…the central bank has already lost much of its credibility this year (last December it planned to hike rates 4 times in 2016), so does it want to continue being “The Fed Who Cried Wolf” and warn of a rate hike by year-end even though circumstances may force yet another round of back peddling?…Yellen would therefore be wise to show some humility and constraint today…
Japan’s Monetary Malpractice
Something’s amiss in this country’s markets…it defies the basic tenets of economics for a nation with the largest total debt, largest ratio of geriatrics and low rates of immigration to have lower bond yields than countries like Singapore, Sweden or Switzerland…
After an internal review of previous measures that fell short of expectations (why, then, should we believe that today’s new measures are going to succeed?), Japan’s central bank has introduced a zero interest rate target for 10-year government bonds in an effort to step up its fight against deflationary pressures (10-year bonds had already been near zero in recent weeks)…
In an additional rhetorical easing step, the BOJ promised to keep the monetary base growing until after inflation “exceeds” 2% and stabilizes there…previously the central bank had set a 2% inflation target without talking about exceeding it…the revised “forward guidance” is tantamount to vowing to continue ultra-easy policy for longer than economists generally thought…consumer prices in Japan, including energy, fell in July for a 5th straight month…
Bank of Canada Governor Stephen Poloz spoke in Quebec City yesterday.
The adoption of a long-term target for 10-year bonds, the first such attempt in the BOJ’s history, comes as global central banks struggle to find ways to get prices rising…unfortunately, central banks are trying to fill a fiscal vacuum as many governments across the world, including ones in North America, are pursuing policy agendas that are suffocating the private sector and therefore restraining growth…
There is a lack of pro-growth fiscal creativity and leadership, a point the Bank of Canada governor tried to make in a polite way during a speech yesterday in Quebec City that was titled, “Living With Lower For Longer“…weak economic growth and low interest rates have been with us for far longer than anticipated, he said, and that trend is unlikely to change anytime soon…
“Raising potential output would boost the real neutral rate of interest and long-term interest rates, and it would increase returns on investments for savers and companies alike,” Stephen Poloz said. “So, if there are policies that would boost potential output – the sum of labour force growth and productivity growth – then we need to pursue them.”
Poloz also spoke about the need to “identify and remove impediments to business growth.”
OECD Warms Of Declining Global Trade Growth
A collapse in trade growth suggests that globalization may be stalling and is contributing to a stagnation in world economic output, the Paris-based Organization for Economic Cooperation and Development warned today…the OECD trimmed its global growth forecasts by 0.1 point for this year and next to 2.9% and 3.2%, respectively…the volume of world trade declined in the first quarter and will fall short of overall output growth in the full year, the OECD said…
“Trade growth rates have deteriorated dramatically since the financial crisis,” OECD Chief Economist Catherine Mann stated in an interview. “Some people might say this is a good thing. No, this is damaging and it shows up as a decline in productivity growth.”
Oil Update
Oil prices are firmer today after industry data showed a surprisingly large drop in U.S. Crude inventories and as an Oil services workers’ strike in Norway threatened to cut North Sea output…Oil took its cue from American Petroleum Institute data which showed a 7.5 million barrel drop in U.S. Crude inventories to 507.2 million barrels, almost twice the fall expected by analysts…official storage data is due to be published later today by the U.S. Energy Information Administration…
Rio Tinto Expresses Optimism Regarding China & Commodities
Rio Tinto Group (RIO, NYSE), the world’s second-largest mining company, is becoming more optimistic on the outlook for commodities demand in China after recent data pointed to a pickup in the construction market. “The drop that we had experienced for the last 2 or 3 years in China seems to have plateaued,” CEO Jean-Sebastien Jacques said in an interview with Bloomberg Television in New York on Monday. “We are becoming much more what I would describe as cautiously optimistic in relation to China.”
Chinese figures on factory output, investment and retail sales all exceeded analyst estimates in August amid a boost from the property market…fixed-asset investment increased 8.1% and property development investment rose 5.4% in the first 8 months of the year…
Commodity prices will still remain volatile in the short-term as Chinese demand is curbed by seasonal effects, Jacques said, adding that he sees higher prices in the medium-to-longer term. “It will vary from one commodity to the other,” he said. “We believe that Copper will be the first one to come out of this twilight zone.”
In Today’s Morning Musings…
1. New addition (emerging Silver producer) to the BMR Top Opportunities List…
2. NuLegacy Gold (NUG, TSX-V) hits new all-time high on discovery north of Iceberg deposit on Cortez trend…
3. G4G Capital (GGC, TSX-V) doubles on Yukon deal with Shawn Ryan, arranges $3 million financing…
4. Pierre Lassonde ups stake in Calibre Mining (CXB, TSX-V)…
5. Daniel’s Den – Part 2 from Day 3 at the Precious Metals Summit in Colorado…
Plus more…click here to read the rest of today’s Morning Musings and all BMR exclusive content, through a risk-free Pro, Gold or Basic package, or login with your username and password…
thanks Ma!
Comment by Daniel — September 21, 2016 @ 10:13 am
Ma Yellen delivers again, but there were 3 dissenters on this vote so those hawks will make themselves heard in the next while…the fact is, though, the U.S. economy just isn’t as strong as Obama would like everyone to think it is…
Comment by Jon - BMR — September 21, 2016 @ 10:17 am
CXO NEWS OUT
Looks like they are done for this year, hope this doesn’t drop all the way back under 20 cents…
Comment by GREGH — September 21, 2016 @ 12:43 pm
Gregh, CXO has done very well with nearly 9,000 m and 59 drill holes, defining 3 Gold enriched and Zinc bearing sulphide zones at Inel over a 600 m strike (as Snip and Brucejack have shown in this district, in an area half that size you can hone in and define a high-grade mine)…in these results, and with the strong overall technical expertise applied to Inel and other surrounding targets at KSP, things are teed up very nicely for a great 2017 when they’ll be able to secure 80% of KSP from Seabridge. CXO performed at a level of efficiency this summer that few companies on the Venture could replicate, especially in the challenging environment of this district.
But what about the rest of this year and the first part of next year? The market is a forward-looking machine. Results from 14 more holes to come from Inel in Q4; however, given that CXO is going to be working on KSP (and KingPin) for years to come, I’m sure the importance of securing a project for the winter months (in a southern climate) has not been lost on management. I would therefore look for something to materialize on that front, perhaps rather soon. It would help the company (and the stock) in numerous ways, giving CXO a powerful 1-2 punch 12 months out of the year.
Comment by Jon - BMR — September 21, 2016 @ 1:07 pm
CXO – Ouch. Summer 2017, are we there yet? Paid a tuition on what I left on the table here. Always learning.
Comment by Vepper — September 22, 2016 @ 5:55 am
The market is a great teacher, Vepper…one can never get hurt by taking some profits on the table when the opportunities arise…however, this morning’s trading in CXO is an overreaction on the downside with the stock almost touching its 200-day SMA…Venture is strong, Gold is strong, CXO has a great project in one of the best mining/exploration camps in the country, and I don’t think this company will be sitting idle for the next 6 months…
Comment by Jon - BMR — September 22, 2016 @ 6:32 am