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USAGOLD/Peter A. Grant/02-27-17
Gold continues to pressure the upside, extending to a new high for the year at 1263.87, up nearly 10% year-to-date. That in fact puts the yellow metal at it’s highest level since early-November of last year.
Gold has continued to take out successive technical levels in recent weeks. As the post I put up earlier notes, the 200-day moving average at 1261.13 was the latest to fall by the wayside, adding additional credence to the emerging uptrend.
Today’s data were mixed, with durable goods orders and the Dallas Fed Index beating expectations and existing home sales coming in well below expectations. Gold seemed to take its cue from the latter, pushing to those new highs.
Most of this week’s focus is on President Trump’s address to a joint session of Congress on Tuesday evening. He said today that he’s “going to have a big statement tomorrow night on infrastructure.” He went on to say that the plan is “to start spending on infrastructure big.”
Let’s hope he also says something about how that big spending is going to be paid for. My guess would be big debt, which could be problematic if the Fed is continue tightening monetary policy.
Dallas Fed President Robert Kaplan pointed out that even “a few” rate hikes would leave policy “highly accommodative.” Kaplan went on to suggest that there might be a new normal for normalization of 2.25% to 2.5% area. He sees that as the neutral rate.
That however, is well below where the previous three tightening cycles ended: 5.25% (2004-2006), 6.50% (1999-2000) and 6.00 (1994-1995). In fact, it would be well below half of the average of the previous tightening cycles.
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