Morning Snapshot: Gold buoyed by weaker dollar

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Published : May 16th, 2017
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USAGOLD/Peter Grant/05-16-17

Gold is modestly higher, buoyed by a weaker dollar. The dollar index has fallen to new 6-month lows, mostly on the back of euro strength, but commodity currencies have also gained against the greenback recently.

The dollar has now retraced most of its post-election gains, weighed by uneven economic data, dimmed expectations of further Fed rate hikes and a growing realization that implementing the President’s reflation agenda is not going to be easy. Nonetheless, Mr. Trump has not been shy about saying he prefers a weaker dollar as a means of stoking demand for U.S. exports. Therefore the President may be pleased to see the dollar retreat, but is likely nonplussed about the reasons.

U.S. data this morning were mixed: Housing starts missed expectations, dropping 2.6% in April. Industrial production rose 1.0% in April, above expectations of +0.4%.

Meanwhile the euro is at 6-month highs, buoyed by optimism in the wake of the centrist victory in the French election and growing belief that the ECB is going to start removing accommodations at some point this year. While Q1 GDP was confirmed at +0.5%, the annualized rate of growth eased to 1.7%.

European market seem to be taking heart from German ZEW investor confidence index. While the headline number slightly missed expectations, the overall Eurozone expectations reading jumped to 35.1 from 26.3.

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