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USAGOLD/Peter Grant/05-10-17
Gold is consolidating at the low end of the recent range. Risk aversion has ticked up in the past 24-hours as a result of intensified North Korea saber rattling and the firing of the FBI Director Comey by President Trump.
North Korea’s ambassador to the U.K. told Sky News yesterday that the DPRK is ready to conduct another nuclear test. There is speculation that both such a test could illicit a response from either the U.S. or China. “If the U.S. moves an inch, then we are ready to turn to ashes any available strategic assets of the U.S.,” said Ambassador Choe Il
The firing of James Comey is being viewed as another distraction that could further delay the implementation of President Trump’s aggressive economic agenda. Commerce Secretary Wilbur Ross has already conceded that Trump’s 3% GDP target “is certainly not achievable this year.” In a Reuters interview, Ross complained that “The Congress has been slow-walking everything. We don’t even have half the people in place.”
An early read for Q2 GDP saw the Atlanta Fed’s GDPNow model revised lower from 4.2% to 3.6% yesterday. Early GDPNow reads for Q1 were above 3% and was ultimately revised all the way down to 0.2%, before the Commerce Department reported an advance estimate of 0.7%. The blue chip consensus for Q2 is presently around 2.7%.
As growth risks are accentuated, the Fed may be forced to adopt a more dovish tone and perhaps even forgo the broadly anticipated June rate hike. That would reinvigorate interest in gold, but there are certainly a number of fundamental factors that one would expect to offer support to gold.
“I do think that gold is probably a real good buy somewhere around here, maybe as low as $1200. I think we’re going to see much higher prices. I think it’s a great hard asset for people to own anyways,” said strategist Todd Horwitz in a Bloomberg interview.
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